Question

Consumers will bear switching costs if: a. the benefits of adopting the new technology outweigh the costs of switching. b. switching costs are substantial. c. the new products are packaged attractively. d. there is a lack of complementary products. e. the new technology is advertised subtly.

Answer 1

Answer: a. the benefits of adopting the new technology outweigh the costs of switching.

Explanation: Switching costs are defined as those cost the consumer pays as the result of changing brands or products, but can also be manifested in the form of time and effort spent during the switching process, the risk of disruption of business operations during the period of switching etc. and so therefore, switching costs can be monetary, psychological, effort-based, or time-based.

Companies with difficult-to-master products and low competition often times will use high switching costs to maximize profit by typically employing strategies that incur high switching costs on the consumer. Therefore, consumers will bear the costs of switching if the benefits of adopting the new technology outweigh the costs of switching.