Is it a good business strategy to make it easy for your customers to leave you?

I had a conversation with JP and a captain of industry a few weeks ago and asked them the above question. My implication was that it is a good strategy because it fosters trust. It shows that you are confident that the service you provide is competitive. Attempting to lock your customers into your service by making it difficult for them to switch just shows that you are afraid of the competition.

I was hoping for a perspective from the real world – I have never had a customer base that I was afraid of losing. I imagine that a public company that adopted this strategy might face some tough questions from shareholders.

The UK government has legislated to enforce this ability to switch suppliers in industries where it is guilty of creating a private monopoly (i.e. the utilities that my bank helped it sell off in the 1980s). It is a retrospective attempt to correct the skewed market that they created. There is no indication that any of these companies would have adopted this policy themselves.

I know of only one example where a company has publicly said it would help its customers move their business away from them and that is hedged by the proviso that they will only help them move to a competitor with whom they have a reciprocal agreement. The company is Flickr, part of the Yahoo group. Here is Stewart Butterfield's statement, as mentioned in Slashdot and Boing Boing.

The captain of industry I mentioned above said he believed the only worthwhile strategy was to pursue the highest quality service at the lowestpossible price. A somewhat stock answer I'm guessing, but I believe he meant that a deliberate lock-in wasn't a valuable part of a high-level strategy. JP said something gnomic so I won't put words in his mouth. I would be interested in what he and Sean Park had to say on the subject.

6 Responses to “Is it a good business strategy to make it easy for your customers to leave you?”

  1. 1 stu July 1, 2006 at 11:02

    That’s my point really — a world of open standards which are consumer-driven and perfectly specificied and faithfully implemented by an ecosystem of competing vendors is a wonderful ideal. Some markets/products operate in this ideal way, but many do not.

    In those that do not of course it’s desirable to push towards the ideal, but in the meantime I think it’s legitimate, desirable and commercially sensible for vendors to offer consumers a proprietary solution which ‘just works’. Desirable because, for example, the utility of the DVR is so great that I would rather be locked into TiVo now than wait until some standards body has drafted and promoted standards for DVRs. That is my consumer choice, in the short term at least.

    There are also varying degrees of lock-in, and the degree chosen will determine how successful the vendor’s strategy is. For example, while only iPods will play iTMS-purchased tracks, they also play mp3s, and would never have taken off had they not done so. Apple has struck the balance here between openness (you can after all move your mp3s to another music player easily enough) and lock-in (you can’t move your purchased music) which clearly appeals to consumers on balance (based on iPod sales).

    More on this process in home media here (see the linked Mosserg article in particular):

    I guess the real issue is the long term one, and whether the short-term utility of a proprietary offering creates a market or product category so popular that the proprietary standard is ultimately licensed or replaced by an open standard (e.g. VCRs, PCs, CDs, screw threads, railway gauges), or whether the lock-in results in a monopoly (e.g. Windows). Clearly the former is vastly better than the latter.

  2. 2 dominicsayers June 28, 2006 at 13:21

    Thanks for the clarification.

    Seamlessness *and* loosely-coupled seems like nirvana. I hope it is easier to achieve.

  3. 3 JP June 28, 2006 at 12:55

    Would you rather have a child that chooses to stay at home or one that is corralled indoors against his/her will? Which one will create more value?

    Would you rather have a partner who stays with you against his/her will or one who chooses to? Which one will support you in times of need?

    Would you rather have a customer who chooses you freely, or one who is forced to trade with you? Which one will stay with you through ups and downs?

    If I am to be gnomic, then I guess I would say there is always lock-in. Voluntary lock-in is a covenant relationship and has immense power. For all concerned. Enforced lock-in is a contract (I can’t even call it a relationship) and isn’t worth the paper it’s printed on.

    WRT Stu’s points, I agree with most, but disagree with some. As you would expect. I particularly disagree with the statement that seamlessness requires the cooperation of multiple vendors. This is only true when vendors set the standards. They will choose to differentiate subtly on the standards, in order to make it hard for customers to mix and match offerings.

    Market- and community driven standards don’t face that issue. We are moving towards a world where such seamlessness is more possible than it has ever been before.

    There’s a prisoner’s dilemma approach somewhere in there, where modern or even partially enlightened vendors recognise that cooperate wins and defect loses. That’s the subject of a post I’m in the middle of, which I will complete when everyone’s gone to bed tonight.

  4. 4 Dominic Sayers June 26, 2006 at 15:05

    Hi Stu. Now I no longer have access to you through internal channels, I think it is incumbent on you to start blogging publicly. You would have at least one subscriber.

  5. 5 stu June 23, 2006 at 14:19

    Tricky one this. As Nick Carr points out (, lock-in may be irksome but commercially it has been a very successful strategy for many and continues to be so.

    Also, the consumer appeal of the seamlessness of locked-in products and services should not be underestimated. When a company locks-in customers to an offering (e.g. Apple’s iTunes Music Store + iTunes + iPod) it can at least ensure everything works perfectly together, whereas open environments tend to be a lot more fiddly, since seamlessness requires the co-operation of multiple vendors (which is usually difficult to achieve).

    Personally I prefer to avoid locked-in offerings, but sometimes will tolerate it if it makes something complicated ‘just work’…

  1. 1 Dominic Sayers » Blog Archive » Lock-in part deux Trackback on August 23, 2006 at 16:49

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