The Lock-In Effect to Prevent Customer Departure
From last year, as my business trips abroad became more frequent, the time I spent on airplanes grew. Each time I book a flight, I first considered the flight and arrival times, and if it does not take too long, I try to purchase my airline tickets at the lowest possible price, regardless of the airline company. However, the only exception is my business trips to Korea. Rather than search for a cheaper airline, I purchase my tickets according to the Korean Air flight dates. Actually, on my last Korea business trip, I went through Korean Air, even though Air Canada flights had similar times and were 40% cheaper. The reason for this is the mileage.
The reason I use my Korean Air miles is simple. It’s because I have used Korean Air several times to travel to and from Korea, so I started to accumulate a lot of miles, which came in very useful. Also, if you become and stay as a Morning Calm level member, you will receive special attention from the airline, and because I have received these special benefits, I have been very satisfied. A few years ago, Air Canada provided a new option to fly non-stop to Korea for a more affordable price, but to do this, I would have to give up the Morning Calm membership, but I did not want to give up the benefits just for the price difference. The strategy of building up conversion barriers and retaining customers through earned mileage and membership levels is a good example of the Lock-in Effect.
The Lock-in Effect is a phenomenon where consumers continue to stay with a company once they purchase a product or service. The reasons for this are varied: it may be due to pricing, technical reasons, feeling like it is a waste to let the time and money put into something go (as in the case of mileage or membership), or even just because of laziness and not wanting to search for anything else. What these reasons have in common is that they block the consumers from going to a third party for products or services, effectively locking them in.
This Lock-in Effect can also be used to generate stable profits for the business. The Lock-in Effect occurs when consumers reach a certain level of satisfaction and will not think about looking for an alternative, therefore reducing worries of competitors and reducing marketing expenses accordingly. So, if you come up with a good strategy to utilize the Lock-in Effect, you can prevent consumers from leaving and increase brand loyalty by their continued patronage.
Other prime examples of the Lock-in Effect, in addition to flight mileage, are choosing printers or coffee machines, which also implement strategies to prevent consumers from finding new alternatives. Selling Nespresso coffee machines with a long replacement cycle will not result in stable profits, but selling them along with disposable capsules, you can generate steady, stable profits. If consumers want to switch to a third-party product because of the costs of the capsules, they must purchase a new coffee machine. Therefore, instead of searching for alternatives, they will continue to purchase the capsules that fit the Nespresso machine.
The Lock-in Effect is evident even in one of the most successful brands in the world, Apple. Apple devices must use iTunes to sync, and despite the inconvenience of not being able to use content purchased through Apple on other devices, many Apple users who are accustomed to this do not seem to mind at all. Even though Android products with better performance and services are released each year, the consumer's loyalty to the Apple iPhone has been overwhelmingly higher than other smartphone brands for years, up to the point where approximately 90% of iPhone users repurchase each year.
Ultimately, you can say that the Lock-in Effect is the best strategy to minimize consumer defection and increase brand loyalty. Therefore, if you are able to enter the market in advance and get ahead to satisfy consumers through the learning effect, the consumers themselves will become steady, loyal consumers through the Lock-in Effect.