An Analysis Of The Motivations And Market Equilibrium Of Customer 's Customer Locking Strategy Competition

Today, accompanied with the intense market competition and apparent product homogeneity, prepaid card are widely applied by many companies, such as beauty salon, fitness center, shopping mall, gas stations and so on. Retail companies get to realize the importance of locking-in customers. In order to grab more market share and profit, they make all kinds of strategies to deal with competition, for example, using prepaid card to provide customers with integral, discount, and premium services to attract repeat purchasing, and then enhancing customer loyalty.However, we should make sure whether the existence of prepaid card is reasonable, whether it promotes the development of market stability. Using method of game theory, this paper firstly discussed the motivation of company issuing prepaid card and consumer’s feedback behavior under the influence of switching costs. Then we described the competition between companies of using prepaid card as a means of competitive strategy to targeting customers, stabilizing the market. Our objectives is measure the effects of prepaid card approach to companies, to customers, and even the society through a relatively new point.Study found that switching costs of prepaid card affects the competition relationship between companies. High switching costs is more advantageous to incumbent firms to build barriers for potential entrants, so that they are more likely to achieve its target customers, seeking market monopoly advantage. Only when switching cost is very low will entrant enters the market be possible. As the number of firms increase in this market, consumers would have more choices and the competitive would be fiercer, but it’s also more conducive to the growth of social welfare. This paper finally gives some suggestions about prepaid card market, including of effective self-management for companies, increased awareness of consumers, appropriate industry policy control, and communication of social medias to guarantee the healthy competition between companies and promote long-term and stable development of the market.