Clear the Clouds from Switching Costs

Cloud video gaming—in which the processing is completed on a vendor’s computer servers—has been growing at a compound annual rate of about 75%, while the traditional video gaming in which processing is completed on the gamer’s local computer has been growing at a rate of less than 6%. The researchers at Durham University, The University of Leicester, and The University of Manchester who cite those statistics used semi-structured interviews and an online survey with gamers to analyze what factors are producing this difference.
     The data indicated a chief reason was how cloud gaming better enabled play of a broad variety of games across a broad range of circumstances. On the other hand, of the numerous factors considered in the study, switching costs exerted much less influence. In this context of video gaming, switching costs referred to the gamer needing to learn how to use the new platforms and accepting that many of the skills that had been mastered to use the old platforms would now be useless.
     Gamers in the study did acknowledge switching costs. One participant told the researchers, “I’ve spent years building up my game library and hardware setup. It would be hard for me to give it up.” Further, perception of higher switching costs was associated with higher reluctance to change from the traditional method. But the researchers say we should expect less influence of switching costs with a hedonic pastime like video gaming than we would with a parallel shift for a utilitarian project, such as storing company data on a vendor’s computer server and having processing completed on the vendor’s computer system. Variety is more important with the hedonic, consistency with the utilitarian.
     The lesson is to attend to the relative influence of switching costs while acknowledging that switching costs do always matter at least somewhat when we’re asking a consumer to make changes. Research findings from Santa Clara University, University of Maryland, and University of Texas-Austin indicate that switching costs exert a stronger influence than does customer satisfaction on whether a consumer will continue to patronize a retailer.
     To make a switch tempting, we’re wise to tell the target population about the ample benefits. People need to see the potential gains in order to put out the energy to form and maintain new habits. However, we too often forget about the importance to the shopper of the costs of the switch.

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Minimize Switching Costs 

Cost Past Customer Satisfaction 

Slant Referral Rewards Toward the Referred 

Tie Attribute Loyalty to Variety Seeking 

Anchor Frequency Estimates to Individuals 

Curtail Quantity Sensitivity by Here-and-Now

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