Executive summary of “Brand switching of high-technology capital products: how product features dictate the switching decision”
Article Type: Executive summary and implications for managers and executives From: Journal of Product & Brand Management, Volume 23, Issue 4/5
This summary has been provided to allow managers and executives a rapid appreciation of the content of this article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefits of the material present.
In highly challenging business environments, attracting new customers can often determine whether or not an organization can secure or sustain a competitive position. However, persuading product or service users to shift allegiances from their current provider is rarely a straightforward task.
The difficulty is further compounded where high-technology products are concerned. Such products are characterized by rapid development, leading to continuous improvement, high-“technology heterogeneity” and significant product differentiation. Changing providers in this environment is especially challenging, as the pace of ongoing change makes it difficult to access information while it still remains pertinent. Such factors increase the risk and cost of switching and provide an advantage to the present supplier. However, firms operating with high-technology products need to constantly monitor their own capabilities to sustain an edge over competitors. Recognition that existing technology is falling below expectations will prompt interest in locating superior and more capable alternatives elsewhere.
Research to date on high-technology products in business-to-business markets is scant. However, one noteworthy study addressed brand switching by “lead users” of magnetic resonance imaging technology. The current work builds on this by investigating similar issues with regard to “mass-market” users on the basis that their decisions to switch or otherwise will be based on different factors. This is attributed to differences in user characteristics and how technology is utilized. For instance, lead users link competitive advantage to research and reputation, whereas finding more cost-effective ways of diagnosing disease reflects how mass-markets users define the objective. The focus on “medical imaging technology” in the present study ensures a similar research context, one where few market alternatives are available and switching costs are enormous.
Based on the previous research, Al-Kwifi et al. identify various factors they suggest will significantly influence the likelihood of switching:
Product features, regarded as a key performance factor. The constantly evolving nature of high technology increases their significance further and prompts ongoing assessment of the competence of existing products. Switching becomes likelier if users discover that newer technology boasting more advanced and differentiated features is on the market. High switching costs then become less of a barrier if an alternative can significantly boost performance capabilities.
Product service. The crux here is whether vital support is quickly and easily accessible should malfunctions occur. Because delays are costly, customers need the reassurance that specialist service engineers are nearby and available to provide support on-site rather than having to wait for help to be dispatched from the head office.
Price. Analysts point out that suppliers enjoy considerable control over the economic value associated with switching. Other scholars assert that its influence over total switching costs makes it the most dominant factor.
Relationship incompatibility. It becomes more difficult to switch the longer a user has been with the same supplier because of the mutual benefits that are in place. Productive relationships take time to build and demand significant effort to put the necessary new practices into place. That there is no guarantee the new provider will prove a compatible partner is another factor to consider.
Technology incompatibility. Switching can be trickier, as additional features and software supplied by a different provider might not be compatible with the initial product. The only guarantee would be to purchase the entire product or system from the new source. But given the costs involved in high technology, certain scholars believe that many users might opt to stay with the original supplier.
Leadership support. How complex organizational procedures are is a key factor here. When structures are more formal, it increases the difficulties inherent in the compilation and appraisal of information about potential alternatives. The switching process is simplified if greater flexibility is evident in company procedures.
The authors consider these factors with regard to users of medical imaging equipment within different types and sizes of hospital, clinics and medical laboratories in Lebanon. An online survey was completed by people involved in the decision to buy a medical imaging product from either the same or a new supplier. The final sample consisted of 512 responses with 289 switching and 223 staying with the same provider.
Analysis revealed that:
Switching was more common for large hospitals and became less likely as the size of the establishment decreased. The lowest level of switching was found for clinics and medical laboratories. Differences in financial status are put forward as a reason for this.
The most critical factor in the decision to switch is product features. It is suggested by the authors that this is due to the fact that features signify the capabilities of the products.
Availability of reliable product servicing also encourages switching behavior. Such reliability can outweigh concerns about developing an effective relationship with the new provider.
Already high switching costs are increased further by the price of technology and incompatibility of technology and/or relationship. Respondents indicated price to be the largest barrier to switching, then relationship incompatibility. But findings here conflicted with earlier work in that technology incompatibility was not significant. Al-Kwifi et al. believe this might be due to the new provider promising to give the necessary support at the outset to ensure smoother integration. That top management support negatively influences switching was largely attributed to “strict formal routines” and that technology spending is mainly funded from the hospital budget. One feature of these routines is leadership preference to limit relationships to one supplier wherever possible.
In the earlier study, it was concluded that switching for lead users is influenced by the features and variety of products, research collaboration, product service, cost of learning technology and the incompatibility of technology and relationships. The authors point out that marketers should be aware of these differences to effectively target each segment.
Brand switching alone does not guarantee an edge, as many competitors will be using the same technologies. How the firm utilizes its internal resources is what can make a noticeable difference. Conducting market research to identify specific factors that influence brand switching for each customer segment is also imperative.
Al-Kwifi et al. advise firms operating in high-technology sectors to provide up-to-date product information so that buyers are fully informed about product capabilities. This can be taken a step further by collaborating with users as a means to better understand their requirements and incorporating the knowledge into product development processes. Such initiatives and the provision of “intensive support” can help reduce barriers and encourage switching behavior. It is especially salient in markets nearing maturity where persuading users to switch might be the sole way of growing market share. The authors additionally suggest that high-technology product suppliers should help during the transition and ensure that an extended service contract is in place to guarantee that technology will remain operational over a longer period.
Conducting similar research in other high-technology industries is recommended. Scope also exists to examine switching behavior in nations where governments might influence or even fund the purchase of high-technology products. A case study approach using direct interviews might prove insightful.
To read the full article, enter 10.1108/JPBM-12-2013-0473 into your search engine.
(A précis of the article “Brand switching of high-technology capital products: how product features dictate the switching decision”. Supplied by Marketing Consultants for Emerald.)
