Classroom Companion: Business

12.3.7 
 Loyalty Programs
Loyalty programs are used by, for example, airlines, hotels, and retailers to stimu-
late customers to purchase their services rather than those of competitors. Club 
membership is similar. Club members may get access to goods and services not 
available for non-members, or they may gain other advantages (e.g., lower price, 
priority, or gift certificates).
12.3.8 
 Bundling
Several suppliers bundle different products to make their offer more attractive, for 
example, offering television, on-demand streaming services, Internet access, tele-
phony, and proprietary content (e.g., free music lists and movies) as one subscrip-
tion. The interface equipment may also be owned by the provider or designed to 
proprietary standards so that switching also compels the customer to buy new 
hardware. The customer may also lose access to content.
12.3.9 
 Search Algorithms
This has to do with the inconvenience (cost and time) it takes a customer to find a 
particular product among millions of other products. By implementing efficient 
search algorithms, a company may ease the search for products causing lock-in of 
the customers. Amazon and eBay are businesses in the digital economy benefiting 
from efficient search algorithms. The same applies to Airbnb, Uber, booking ser-
vices, and streaming of music, films, and video. The search algorithm is particu-
larly useful to identify rare products in the long tail and stimulate sales of these 
products (e.g., Amazon).
Retailers may also benefit from efficient search algorithms picking out potential 
customers of a product. The retailer may then target advertisements and sales pro-
motions directly at the customer. Facebook, Google, and influencers lock in adver-
 
Chapter 12 · Lock-In and Switching Costs

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