When a business effectively builds in switching costs, its customers and/or suppliers become reluctant to switch to another competitor.

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This is because when a customer or supplier has invested time, effort, and/or resources in a particular business, they are less likely to switch to a new one, as it would entail additional costs and risks. By creating switching costs, a business can increase customer loyalty and retention, reduce customer churn, and protect its market share. Examples of switching costs include contractual obligations, membership fees, loyalty programs, exclusive deals, customization, and product bundling.

When a Business Effectively Builds in Switching Costs, Its Customers