Introduction

Switching cost refers to time, monetary, and psychological cost that is incurred when consumers change their product or service (Dick and Basu, 1994). Since switching cost has important implications in analyzing competition in the market and designing marketing strategies, it has been studied in various markets with different perspectives (Park and Koo, 2016; Frank, 2015; Kenney and Pon, 2011). However, as previous studies suggest, the switching cost of consumers locked-in to a specific product or service is higher than that of those who are not (Calvo-Porral et al., 2017; Klemperer, 1995). If the market is saturated enough and market share expansion by capturing new consumers is not easy, the only choice left for a marketer is to churn in customers who are already locked-in to other products or services, and have high switching costs. Therefore, many businesses design and practice various marketing strategies to attract customers, such as quality improvement, advertisement, incentive programs, and bundling to lower locked-in customers’ switching costs (Ferguson and Brohaugh, 2008; Shin et al., 2015; Farrell and Klemperer, 2007). Among various options to lower switching costs, this study empirically analyzes the effect of the option that indirectly lowers switching costs by introducing B2B services to workplaces. A B2B transaction is a transaction between businesses. However, the ripple effect of the transaction can influence employees in the workplace and provide additional economic opportunities for the B2B service provider (Gummesson and Polese, 2009). This study tries to empirically analyze the effect of the option that indirectly lowers switching costs by using the example of a newly introduced B2B service in the Korean telecommunications market: Enterprise LTE. Enterprise LTE is a B2B service that provides businesses with faster and securer telecommunication services. However, it is also capable of providing additional services to employees who use the same mobile telecommunication service provider (TSP). If one can estimate the amount of benefits given to employees after the introduction of Enterprise LTE to their workplace, and the switching cost of employees using other TSPs, one can calculate the switching probability of employees, and measure the extent of introduction of B2B services that can affect the transaction between business and consumers (B2C market). The study also analyzes how various types of services affect the switching probability of employees, and suggests a service fee that is optimal in terms of revenue maximization of a B2B service provider. The paper is organized as follows. In Section 2, we first provide brief information about the Korean telecommunications market and Enterprise LTE services. Then, we review some related literature. In Section 3, the research framework and methodology used for the analysis are explained. Section 4 provides estimation results and the results of the simulation analysis. Finally, in Section 5, we summarize the study and provide policy implications for marketers, and conclude with a mention of the limitations and directions for future research.