Question

ABC Bank utilizes the janitorial services of Bob's Scrub-A-Dub-Dub to keep their buildings clean. Bob's provides all the necessary cleaning supplies, training of crews, background security checks (since the crews work after hours) and all other associated expenses. The other available janitorial services do not typically provide security checks and a client such as a bank would have to hire guards to watch the work of the janitors. This expense effectively limits the bank to utilizing only Bob's services. This illustrates the concept of

A. high employment costs.
B. unfavorable supplier status.
C.high switching costs.
D. favorable quality status.
E. complementary products

Answer 1

This illustrates the concept of high switching costs.

Option: C

Explanation:

Switching costs generally refers to a consumer's financial costs when moving between brands, goods, services, or suppliers. It is important to keep in mind, however, that these costs may include non-financial ones. Certain factors such as financial, time, and attempt-based costs often form portion of the cost of shifting.

The greater the switching price, the less probable a consumer will be prepared to turn on brands, goods, services or suppliers. The greater the switching cost to customers, the less benefit the customer receives from switching to a new brand, commodity, service or supplier.