Recognizing Lockin I

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Recognizing Lock-in I

• Competitive Strategies for Network Economies MGT
  523
• 01/29/2002
• Santeri Leijola

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1 Answer

• Lock-in amplifiers use the process of synchronous
  detection to recover signals that have been
  buried in noise. They act as extremely narrow
  pass band filters with the pass band centre point
  selected by a reference signal. -
  http//www.scitec.uk.com/lockinwhatis.htm

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Traditional definition of lock-in
lock-in British, informalnoun a lock-in is when
a pub locks its doors and allows people to
continue drinking after the time when it should
have closed Our local pub had a lock-in last
Friday night. (from Cambridge International
Dictionary of Phrasal Verbs)
lock-in Noun. The time after a public house has
closed when a chosen few are offered the chance
to buy more drinks. An illegal activity, hence
the locking of doors. (from Dictionary.com)
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Typical experiences with lock-in

• Lock-in seems like a good idea at the time of
  making the decision
• You rarely know for sure what will end up
  happening during the lock-in period
• After the lock-in period you view the arrangement
  more negatively than when entering into it

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Books definition and the lock-in continuum

• Whenever the switching costs are substantial,
  users face lock-in

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Long distance services example

• Profit from current customer total switching
  costs quality/ cost advantage
• It makes sense for the incumbent to raise and
  emphasize switching costs
• The new entrants strive to decrease switching
  costs or circumvent them (e.g. 10-10-220)

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Example Wireless operators business logic
Assumptions ATT Wireless customer acquisition
cost of 409, 40 revenue/customer/month, 30
profit/customer/month
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Wireless services example

• The total cost of switching costs the customer
  bears costs the new supplier bears
• If current customers are locked in with a long
  contract, there are no incentives to innovate or
  improve quality

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Conclusion

• Lock-in exists when you have switching costs

Weak lock-in
Strong lock-in
Switching costs increase

• Long distance services
• Car spare parts

• User interfaces

• Wireless services
• IBM batteries

As a customer you need to look ahead and reason
back before making a decision.