Vendor lock-in

In economics is called lock-in effect (of English. To lock in for "include" or " lock up " and Roman effectus for " effect " ) refers to the impact or Anbindeeffekt when a change of the current situation due to high switching costs unprofitable will. The level of switching costs determines the extent of the lock-in effect. Providers can bind so customers at what used also as a tool for customer retention (or abused ) is. Economically lock-in effects are usually classified as welfare damaging.

Strategies

Aim is a customer to switch to another product, thereby arise switching costs for the customer and the provider. There are companies which deliberately follow a lock-in strategy to retain customers: they complicate targeted and wanted customers to switch to another product ( = " they use the lock-in effect"). Thus, they gain advantages over other competitors. An exchange is meaningful only for the customer, if the resulting from the change in benefits is greater than or equal to the cost of switching.

Consumers ( known insurance brokers, the personal situation of long-term cooperation ) through financial investments in certain technologies ( operating system or runtime environment ) or by time investment to a provider or bound to a group of suppliers. This causes often referred to as vendor lock - in vendor lock-in.

In general, caused most lock-in by the customer. His own preferences lead to product or provider-specific investments are realized. In most cases, this type of bond - although even caused - perceived as externally determined and negative. This feeling occurs later than on then once the customer wants something else (eg because he is dissatisfied with the product ) and is aware in this context, the switching costs. One possible strategy of the customer could be to reject any further investments in the existing product and the medium to seek alternatives.

The aim of the party is, therefore, that the customer perceives the benefits of a product of higher quality than the lock-in costs. Therefore, the provider tries eg to increase through personalization options and discount offers customer benefits to the extent that he still goes to "volunteer " in the lock-in situation. The provider may cause normally where none exists by give bonus or loyalty points an artificial lock-in effect there as well. Examples are discount coupons, bonus miles for frequent flying, certain credit cards and telephony services which can only be used with the original company all, causing losses when switching to competitors. Especially in the online environment is to implement due to the great competition and market transparency, the construction of barriers to change and difficult to use -creating mostly without appropriate measures barely. The customer can benefit from this constellation, possibly even.

Trigger

• Contractual obligations: A participant is bound by a contract agreement; for non-compliance threatens a penalty.
• Training and Learning: Furthermore, the customer is based on a product- or technology- specific knowledge. In the case of a change of this learning process would be repeated. The learning curve is to be operated comparable large so that the switching barriers are high.
• Search costs: When leaving a system arise search costs, which will, however, prevent the participants.
• Loyalty costs: A game participant may lose benefits from a standard if he wants to leave it.
• The individualization of products with regard to the wishes of the customer deepens the relationship between the business partners. Increase the more specific investments makes a customer, the higher the switching costs: This is true. The switch to a competing product is less likely.
• It can be given a direct dependence on complementary products. For example, the manufacturer of a medical device sold the computer for data processing with the same, a standard unit can not be used due to modifications of the interface. Other examples follow later in the article.
• Based on the specific knowledge results in a habituation effect of the customer towards the product or the seller. The convenience of not wanting to accept any changes here, also leads to lock-in.

Modeling

Game theory modeled lock-in effects as the imprisonment of a player in a system, although a superior system exists. Bound means that the change from an underpowered standard in superior shape with an extremely high effort. The participant should precede the commitment to research possible alternatives to a system and attract the critical mass of viable substitutes into consideration

Examples

Razor blades

The first big success according to this model was the Gillette razor by King C. Gillette. Instead of the then usual razor that could be sharpened, Gillette sold a patented blade holder adapted to the disposable safety blades that were cheap to produce and can be sold again and again to the owners of the blade holder with high margin.

Cameras

The camera industry provides a good example of lock-in. On many cameras, the lenses can be replaced. The lenses are an important addition to the camera and often cost more than the camera body itself since at least the 1930s, manufacturers have patented fastening systems interchangeable lenses. This ensured that the camera manufacturer had a monopoly on lens sales during the duration of the patent. In addition, interchangeable lenses often have built electronics since 1989. The manufacturers seek to lock-in and outside of the patent, by not releasing necessary information and competitors must either pay license fees or the information need to find out yourself. The same is such as batteries done with other camera accessories, so that a change of brand frequently is a complicated and costly affair.

A similar approach was tried briefly in the field of digital cameras by Sony with the storage medium used: The memory stick was a proprietary flash memory whose specifications have not been released by Sony. The storage media were two to three times as expensive as products of other standards comparable capacity. When changing the digital camera to a different manufacturer and the storage media were not used further. The situation changed only appeared as compatible products on the market.

Computer

Vendor lock-in is pronounced in the computer and electronics industries. In the computer industry is both hardware and software attempts to hinder the interoperability at all levels: in proprietary operating systems, applications and file formats. With operating systems and microprocessors, there is one clearly dominant manufacturer able to achieve monopoly. The disability is rarely absolute, but just high enough so that the customer has an advantage if he prefers the product range of the supplier.

Microsoft Windows

The European Commission refers in its published on 24 March 2004 decision on Microsoft's business practices in paragraph 463 Microsoft's manager for C development Aaron Contorer from an internal Microsoft memo for Bill Gates February 21, 1997:

Another example is the Austrian Wienux project, which aimed to replace the Microsoft Windows operating system with a KDE system with Debian Linux. However, once developed by Microsoft educational software " Smart Mice ", which is to serve the acquisition of language in kindergartens, supports only Internet Explorer has been solely on the grounds converted three-quarters of already migrated to Linux machine back to Windows. The " Microsoft Schlaumäuse Initiative" was launched in Austria in September 2006, while the Wienux project began in 2005. Munich on the other hand already planned in 2003 with the help of LiMux save costs in the city administration and led the project to date consistently, despite some problems with. (February 2012), however, expensive retraining and a new strategy of software procurement were this purpose necessary. Thus was set to browser-based software and a self-programmed template system called WollMux.

Agriculture

Complete packages for the agricultural crops with coordinated and interdependent transgenic cally modified and thus patentable plants, pesticides, weed killers and fertilizers bind farmers to manufacturers of agricultural feedstocks. With the terminator technology ( genetic technology for application limitation ) attempting to farmers to take the opportunity to produce their own seed.

Health insurance

Private health insurance companies try to retain some of the accumulated savings for the insured reserves ( aging provision ) for himself if he wants to switch to another insurance company. It tries to make the cost of the policy holder during a change of insurance for him to be prohibitively high. The competition between insurance companies can thus focus on young people.

Coffee Machines

Since the introduction of coffee pods / capsules have providers of such systems, the possibility of a " community building " by the lock-in of a machine buyer in a special Pad-/Kapsel-Standard. The binding of the machine to a Pad-/Kapselstandard forces the customer to acquire the associated pads / capsules at the same manufacturer. He is thus dependent on the pricing of Pad-/Kapselanbieters.

Typewriters

Earlier mechanical typewriters had the problem that the most common letters used entangled into each other when writing. Christopher Latham Sholes in 1873 was of an arrangement of the letters on the typewriter developed, in which the snagging rarely occurred. The result was the so-called QWERTY keyboard. This time -proven array system has been widely used by the mass production of typewriters in 1904 by the company Remington Sewing Machine Company and became the industry standard. With the development of electric typewriter QWERTY assignment was no longer necessary. Engineers have developed key arrangements, which would result in a time savings of 5 to 10 percent for the typist. The standard of the QWERTY arrangement, however, was already so widespread that the new standard does not prevailed since the relearning of typists would have been a bit of work. The improved system has therefore not enforced.

Employment

Lock-in effects also occur in the employment relationship between employer and employee, provided that at least one party had to pay costs in advance to the other party to be bound (eg, cost of learning company-specific skills or job search and hiring costs ).