Switching Costs

The smart solution provider, therefore, finds ways to institutionalize that inertia by continuously making it easier for the end customer to order through its team rather than through another supplier. Or, to put it another way, the intangible elements and benefits of a particular relationship can help intertwine a customer with a certain supplier to the point where the customer perceives the anticipated switching costs to buy from another vendor or solution provider to be not worth the effort.

MICHAEL VIZARD

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Can be reached at (516) 562-7477 or via e-mail at [email protected].

One vendor that does a notable job in this regard is Dell. For many of its best customers, the company has gone to great lengths to tie their purchasing processes directly to the Dell Web site. This gives Dell customers a custom portal at their location that tracks all their spending and their overall IT assets, making it difficult for solution providers that can't leverage the same level of IT infrastructure internally to compete. Or does it?

It turns out that at least one distributor is using its own IT infrastructure on behalf of VARs to help them deploy the same sort of strategy"and make it tougher for their own customers to switch to other suppliers. That distributor, Tech Data, allows VARs to install a portal at their end customer's location that is packaged with the VAR's brand but actually is run by Tech Data's own IT staff.

Among all the distributors, Tech Data probably has the most sophisticated e-business infrastructure. While it remains somewhat challenged when it comes to telling VARs exactly how to leverage it, the fact remains that Tech Data leads the industry in this regard in terms of sophistication and scope.

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E-business is no substitute for local touch. But when these two powerful motivational forces are combined, vendors such as Dell that rely primarily on e-business are a lot less likely to win the battle for the hearts, minds and, yes, the inertia of the customer.

Are you making it hard for your customers to switch? I can be reached at (516) 562-7477 or via e-mail at [email protected].