Published:

11/01/2012 12:01pm

How to keep your customers and drive competitors crazy

When you’re staring a business or in an existing business you are probably creating new products or developing new ways to service your customer.

But, what happens when that product your selling or service you’re providing starts catching on? What stops someone else from doing what you do for half price and taking your customers?

Now I’m positive there are tons of answers to this question. For example there are a lot of search engines that give search results just as good or even better than Google, with fewer ads, more results per page, better privacy, and etc. And everyone hasn't switched, in fact, almost no one has switched, because of the lock-in effect is really powerful.

The lock-in effect means there are customers who always go to the same suit tailor, graphics artist, clothes cleaners, and provider of a service because it’s just to hard to switch. It might be hard emotionally, financially, or technologically.

So what IBM did in the early 1980s was lock-in customers by selling them equipment that ran only IBM software. This is also the lock-in effect Apple has when you buy their hardware, you can’t switch to PC because their software doesn't work.

The lock-in effect is also the reason that Starbucks spend so much effort marketing the Starbucks Rewards Card because if you’re in an airport and there’s a Starbucks shop and you have your Starbucks rewards card, you’ll just choose to go there. It’s easier and builds up lock-in for Starbucks (which is where you earn 1 Star every time you pay with your registered Starbucks Card or Starbucks mobile app at a participating Starbucks or at their online store. As you collect Stars, you move up to bigger benefits.).