Six strategies for locking customers: teach you how to embed switching costs into business models

Editor's note: This article is from Strategyzer, the Chinese version is compiled by Heaven Zhuhai Branch Rudder.

Having a good product doesn't mean you can capture and lock up a large number of customers, you must also find a good business model to attract your customers and lock them in the ecosystem of your products. When it comes to user lock-in, where switching costs is a good way, you can see Adobe,salesforce, Microsoft, Rolls-Royce these are the way to lock up their users, and use this to hold the user to make princes, the competitors far behind. Let's take a look at some of the frequent user-locking strategies.

I previously wrote about "seven mechanisms for creating a good business model", and switching costs are one of them. Switching costs allows you to lower your user acquisition costs, allowing you to squeeze recurring benefits from your customers over the long term (recurring Revenue), and it's the moat you're competing for in this battlefield.

There are many ways to embed the switching cost into your business model. If you study adobe,salesforce,google, or Rolls-Royce, you can see that their monopoly is not accidental, they have their own killer to keep their customers locked in their ecosystem.

Let's take a look at the 6 tricks that these companies commonly use to lock up users by switching costs:

The first move: basic product pull consumption

By providing a basic product to lure users into their ecosystems, businesses then tout the matching ' consumer goods ' that other users have to buy to squeeze out the customer's profits step-by-step.

The price of the Nespresso coffee machine (the base product) is only cost, and it is sold in major marketers, so everyone can buy it. But the high-margin coffee bag that goes with it is only available through the Nespresso sales channel, so it can earn a lot of profit from it. Until 2011, there was no way to purchase these bags from other sources, since only the Nespresso had the right to produce. That's the way the Nespresso locks up their customers ' moves.

In addition to the Nespresso, many other well-known companies are also using this trick, such as Gillette (razor-pulling razor blade consumption), Kodak (camera pull film consumption), HP (printer pull cartridge consumption)

The second trick: ' Data traps '

By encouraging users to generate or purchase content or applications on their proprietary platforms, the enterprise achieves the effect of locking users through data. These platforms can be a website, a software, or a device. If a user wants to move from this platform to another platform, they must abandon all the data and activity records on the platform, because none of this content can be migrated to other platforms.

For example, content and apps like AppStore and Google Playstore are not migrated to other markets. If you need to go to another competitor's platform, Apple and Android users must abandon the music, apps, or movies they bought in those stores.

We take Spotify for example, it is a music software company, its application provides a huge music list, and the above music can be downloaded from any major platform. But once you want to move from Spotify to other music apps, your previous huge music playlist is the equivalent of burned. This is another form of ' data trap ' that now threatens the revenue of Apple and Google Music and how they switch costs.

The third trick: ' Learning curve traps '

Customers often feel discouraged about the need to learn from scratch how to use a new product. A product provides an excellent value proposition, but the product needs to be trained to use it well, and the ' learning curve trap ' is about a value proposition that works around it.

Salesforce and Adobe are using this "learning curve trap" to make their customers "hooked" – some users struggle to become certified experts on their products. This way, unless the use of the product has made them extremely painful, they will not give up the product easily.

Another similar example is box, the enterprise-oriented file synchronization application. It's so complicated to start building a shared and synchronized file infrastructure, so the companies that use box prefer to keep using box.

At the same time, switching to another tool scenario means that the experience of the tool you've accumulated in the past will be completely useless, making it more difficult for users to escape.

Four strokes: ' Industry standard traps '

Sometimes people are forced to do one thing entirely because everyone else does it. This is another way the enterprise uses to lock users. They are in the position of recognized industry leaders. Their products, or one of their product features, have become the industry standard, which makes it difficult for customers to choose other products.

Microsoft Office Word should be a good example here: Doc This format is specifically handled by Microsoft Office's Word app, and today it is almost impossible to do normal work under the tools that are not created and supported by the DOC format, so the user's switching costs are very high. Adobe's PDF is another similar example.

Five strokes: ' Service trap '

If your competitors use the ' service traps ' trick, then you're not just competing with one of the products they offer, but competing with the full experience they offer. In this approach, an enterprise binds their products to complementary services that are provided only to their customers.

Rolls-Royce provides airlines with aircraft engines, and they offer "hourly billing" terms to achieve their switching costs. In essence, the "hourly billing" clause covers the package charges for aircraft engine leasing, maintenance and repair services. The real game changer here is that they only charge when the airline's planes actually use the engine. The experience is great for airlines because it frees them from the huge loss of normal takeoff due to engine problems. By bundling high-margin services with top-notch aircraft engines, Rolls-Royce makes it difficult for its airline customers to switch to other competitors.

Another good example is the approach of the Heineken Group, which provides customers with the best and most advanced building tools to build their "service traps", which makes it difficult for other manufacturers offering cheap products to cross the moat they have dug.

Six strokes: ' Exit trap '

"Exit traps", enterprises contract to force users to use their products for a specified period of time. If the client wishes to withdraw from the contract, it must pay a certain amount of the breach. This is a very common means of preventing users from switching to other competitors. As at& and Verizon's telecoms operators charge a $350 break, T-mobil is trying to pose a threat to the business model by delivering the cost to customers who have switched over.

In addition to the above-mentioned ways of embedding switching costs into business models, there are certainly other ways, especially domestic examples, such as "Contract machines". If you think about it, you might as well say it in the comments and discuss it together.

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Six strategies for locking customers: teach you how to embed switching costs into business models