Question

In many instances, customers develop loyalty to an organization in part because of costs involved in changing to and purchasing from a different firm. These costs are called:

A. Financial inertia
B. Opportunity costs
C. Switching costs
D. Fixed costs
E. Retained cost

Answer 1

Customers may stay loyal to a firm partly due to 'switching costs,' which are the costs associated with changing to a different company's product or service. These costs are different from menu costs, which are the expenses associated with changing prices in a firm, and from implicit and explicit costs, which include out-of-pocket expenses and opportunity costs respectively.

Step-by-step explanation:

In many instances, when customers develop loyalty to an organization, a significant part of that loyalty can be attributed to the costs they must incur when switching to a competitor. These costs are generally termed as C) switching costs, which can include a variety of economic and psychological factors, such as the time and money spent learning a new system, the risk of trying a new brand, or even the emotional attachment to a familiar service or product. Switching costs are different from other types of costs like menu costs, which refer to the actual financial expense of changing prices within a company, or implicit and explicit costs, which represent the actual out-of-pocket expenses and the opportunity costs of using resources that a firm already owns, respectively.