Anybody who has tried cancelling a platform subscription would give up sooner than later. The entire platform user interface (UI) is geared towards making it almost impossible to fire your platform service provider.
ये इश्क़ नहीं आसाँ इतना ही समझ लीजे
इक आग का दरिया है और डूब के जाना है
-जिगर मुरादाबादी
AI Art- DALL-E 2 Trying to Switch Platforms over a River of Fire in Mughal Style Art
The platform might see it as an attempt for creating customer stickiness but it can turn to desperation for users who might outgrow their once-loved platform!
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During the Week, Amazon was sued by Federal Trade Commission over allegation of making it harder for its customer to quit Amazon Prime. This complaint accuses Amazon for enrolling consumers in Amazon Prime without consent and sabotaging their attempts to cancel.
According to FTC, Amazon employed manipulative tactics, referred to as "dark patterns," to deceive users into signing up for automatically renewing Prime subscriptions. Additionally, Amazon deliberately made the process of canceling Prime memberships complicated and difficult. The main objective of their cancellation process was not to facilitate easy cancellations, but to discourage and prevent users from canceling. Amazon's leadership resisted or delayed implementing changes that would have made it simpler for users to cancel Prime, as these changes would have negatively impacted their financial performance.
The central thesis of three part series is as follows- Platforms gain extraordinary power through user side network effects and commodification of supplier and use access to cheap capital to execute Predatory Pricing and Vertical Integration. Governments must maintain oversight over platforms by continuously evaluating the threat to Customer Welfare and work towards Preservation of Open Markets.
One of the ways that platforms exercise this power over their users is through Switching Costs. In the context of platform businesses, switching costs refer to the time, effort, and resources required for users to transition from one platform to another. Switching costs in platform businesses refer to the difficulties users face when trying to move from one platform to another. They can be influenced by factors such as the data and profiles users have on the platform, the connections and relationships they've built, the integration with other services, and the familiarity with the platform's features. Switching costs act as barriers that make it challenging for users to switch platforms. Here's a closer look at the impact of switching costs on platform businesses:
Data and User Profiles: When you consider a social media platform like Facebook, its users have invested time in creating profiles, connections, and uploading content. Switching to a different platform would mean recreating profiles, reconnecting with friends, and losing access to previous posts and interactions, which can discourage users from making the switch.
Network Effects: Take the example of a professional networking platform like LinkedIn. Users benefit from the network effects as more professionals join the platform. Switching to a different platform would mean losing connections, followers, and the professional network they have built, reducing the value of the switch for users.
Integration with Third-Party Services: Imagine an e-commerce platform like Amazon. Many users including yours truly have linked their payment gateways to streamline their shopping experience. Switching to a different platform would require users to disconnect and reconnect these integrations, causing inconvenience and potentially discouraging the switch.
Learning Curve and Familiarity: If we consider a ride-hailing platform like Uber. Users are familiar with the app's interface, features, and navigation. Switching to a different platform including me-too platforms would require users to learn a new app, its features, and adapt to a different user experience, which can be time-consuming and prevent them from making the switch.
Cost of Migration: Cloud storage platform like Dropbox may charge fees for transferring data or subscriptions to another platform. Users may be hesitant to switch due to the additional costs involved in migrating their data or services, making it a barrier to switching.
Loyalty Programs and Incentives: Consider a retail platform with a loyalty program like Nykaa Prive. Users accumulate rewards, points, or exclusive benefits based on their purchases. These rewards act as a switching cost, as users may be reluctant to switch to a different platform and lose the benefits they have earned.
Lock-In Contracts: Many software-as-a-service (SaaS) platform like Adobe Creative Cloud may bound Users by annual contracts that require them to remain with the platform for a specific period. These lock-in contracts make it challenging for users to switch to a different platform before the contract expires, acting as a switching cost.
To conclude, a comprehensive grasp of the implications of switching costs is imperative for platform businesses managers. Such businesses can capitalize on switching costs to bolster user retention through consistent enhancements to their offerings, user experience optimization, and value creation for all stakeholders that surpasses the costs linked to migrating to a rival platform. Interestingly, mitigating obstacles to switching and ensuring a smooth transition process can aid in attracting users from competing platforms, thereby preserving a competitive advantage.
OTW
Over the Weekend, I moderated a panel discussion on The State of Sustainability. The annual panel discussion Conflux organised by Alumni Relations Cell has become an important platform for meeting and learning from our distinguished alumni on a recent industry trend.
The State of Sustainability saw an engaging exchange of ideas amongst Gaurav Jha- CFO & Enterprise Value/Sustainability Consulting at Accenture (MBA Batch of 2007) , Dinesh Goud- Founder of Eaze Water and Managing Director at Zaka Natural Mineral Water (MBA Batch of 2015),Rupesh Vasireddy- Strategic Partner at ELifecycle Management (ELIMA) (Batch of 2018) and Sathish Suri- Managing Director at Greenpath Energy & Sustainability Services.
The panelists gave insightful responses to questions pertaining to driving forces behind sustainability movement. Audience questions were thoughtful and generated important discussion on consumer behaviour, financial implication and role of #SmallWins in our sustainability journey.
Great work by the Alumni Relations Cell of IBS Hyderabad in conceptualising and executing the event. Great start to an exciting year.
I Love You
Shailendra
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