Evan Carmichael explains why customers stick with their current providers even when better alternatives exist. Switching costs—the time and money required to move—are so high that a business needs off-the-charts value to win. He shares why a Facebook competitor offering 80% ad revenue failed, and why he stayed with TD Bank despite better service elsewhere.
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Think about switching costs. If you are asking a customer to move from a current supplier to working with you, there's switching costs. Switching costs are all the, the time and money that's gonna be invested into moving things over from one account to another, to working with another company to yours. So you have to provide incredible value because if you don't, it's not just that they may like the company better. If you're at the same company level, they're never gonna go with you because it costs too much time and energy to switch. You have to provide crazy amounts of value to get them to come over to you. I got a YouTube comment from Alex who wrote in, he wants to basically create a new Facebook. So he wants to create the next Facebook and he says how his is different is he's gonna help Help share in the revenue. So instead of Facebook getting all the money, he's gonna give the money to the people. 80% of it, he keeps 20%. What a great idea. Here's the problem: there's huge switching costs to move from Facebook over to this network because none of my friends are on your new network. Why do I go to Facebook? It's not because it's a great experience, because all of my friends are there. So why would I go to your system? I'm not gonna go just to make money. And I'm not gonna make a lot of money because I won't spend much time there because my friends aren't there. So you need to come up with something way better, way more value, crazy value, not just making a little bit of money. What's the main reason for me to want to switch from one network to another? Listen, today I was at a bank. I got a check that I had to deposit at Bank of Montreal, okay? And I didn't want to go to Bank of Montreal. All my banking is at TD. Okay, but this check was an insurance claim and I had to go to Bank of Montreal. So I had to go to Bank of Montreal to open up an account to deposit a check just so I could then close the account. I went in today, opened up my account, everybody there was awesome. They were better than the people at my TD branch. It was great working with them, we had great conversations, and they knew that I was gonna leave. They knew that as soon as that money was was deposited and the check cleared, I'm closing my account. And I felt bad for a little bit. You know, like, I really like these guys. Like, I could get along with them well. I could see myself doing banking there. I really like them. But there's too much switching costs. As much value as they provided, they didn't give me enough to make it worth my time to switch all of my accounts. I've got like 10 different bank accounts to move them over to Bank of Montreal. Even simple things like, I use Visa, I love my Visa credit card, it integrates well with my bank. Well, they use MasterCard. I don't have a MasterCard, I don't want a MasterCard. Switching costs. So even though they had better service, I'm still not gonna go there because I'm used to using TD and it's gonna cost me too much time, grief, and aggravation to move over. So if you want people to switch from one thing to another, the value has to be off the charts. It's got to be crazy good. If you want to compete with Facebook, you got to provide something that Facebook doesn't even touch, something that's way better than Facebook, something that the world hasn't even seen yet. And it's not going to be from giving people 80% of the ad revenue. It has to be something value-based. And whatever business you're in, if you want people to switch one customer to to, to you, you gotta find a way to really stand out, to really be different, to really touch people in a way that none of your competition does. Because the more they're built in and locked in with their current suppliers, the harder it's gonna be to get them to do business with you. So always factor in those switching costs to your business, otherwise you're not gonna make any sales. Believe. For those of you watching, like the video, please give it a thumbs up below. And I want to hear your thoughts. What do you think about switching costs? What do you think about Alex's idea? Let me know, leave a comment underneath. If you have a question for your business, leave it below, I'll make a video response. Thank you so much, and I'll see you soon.
