Through research and development, a cable company has found a way to use its existing network lines to serve customers with a new product offering – home security systems. The company is offering the service for a lower monthly fee than most security companies. However, the sales force didn't see a lot of interest among its customers who had an existing security system from a competitor until they ran a promotion for reduced prices on equipment and free installation. Which of the competitive forces is at play? a. Cost conditions b. Bargaining power of suppliers c. Customer switching costs d. Complementors

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10-10-2019
Business

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Through research and development, a cable company has found a way to use its existing network lines to serve customers with a new product offering – home security systems. The company is offering the service for a lower monthly fee than most security companies. However, the sales force didn't see a lot of interest among its customers who had an existing security system from a competitor until they ran a promotion for reduced prices on equipment and free installation. Which of the competitive forces is at play? a. Cost conditions b. Bargaining power of suppliers c. Customer switching costs d. Complementors

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The correct answer would be option C, Customer Switching Cost.

The sales force didn't see a lot of interest among its customers who had an existing security systems from a competitor until they ran a promotion for reduced prices on equipment and free installation. So Customer Switching Cost is at play.

Explanation:

When a cable company found ways to use its existing network line to serve its customers with home security systems, they faced a problem of unwillingness of its customers to switch from the existing home security providers to them. So here the competitive force of Customer switching cost comes in place. Clients were ready to switch towards the new home security systems if they were given new equipment at lower prices with free installation.

This would act as the customer switching cost for the company. Company is gaining customer by giving them some advantages. This would be considered a cost for the company but in long run, customers would be an asset for the company.

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