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OK the final way a company can go about building a sustainable competitive advantage is integrating

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high switching costs into their business switching costs or expenses or disruptions a customer will

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encounter when switching from one product or service to another is beneficial for companies to create

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high switching costs as doing so can help them retain customers.

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Cell phone service providers for example can lock in customers because of their high switching costs

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to change providers a customer might need to terminate an existing contract and purchase a new phone.

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Both of which can be costly as such customers might be less motivated to switch providers even if they're

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dissatisfied with their current service.

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You see how well a company is doing is determined by its ability to maintain its customer and supplier

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base regardless of how fierce the competition is.

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When a company provides a customer with a product or service that is difficult to break away from in

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terms of cost time or convenience it's far more likely to hold onto that customer over the long term.

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And this makes competition more interesting because if the company's competitors want to gain more market

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share they must offer an extremely attractive price or performance alternative to entice consumers to

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switch from their current provider.

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Their competitors will have a very difficult time taking market share away because of these cumbersome

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switching costs.

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You know in many cases customers just aren't interested in dealing with the fees or aggravation involved

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in making the switch regardless of how appealing a competitor's offering is.

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Not only does this fact allow the company to maintain a strong customer base.

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It even makes it possible for them to incrementally raise their user prices over time in order to consistently

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increase their profits.

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That is to say when a company is able to establish itself in an industry it can have higher pricing

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power over its competitors.

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And this is something that will help it survive over the long run.

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So as a value investor make sure you look for businesses that are industry leaders and they know how

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to integrate high switching costs into their operating and marketing practices.