Is Tech Eroding Consumer Loyalty?


In many categories, the value of brands may be in decline.

In many categories, the value of brands may be in decline.

Is this the end of brands? Of course not. Brands still play some important roles that are not likely to go away. And in categories where prestige, status, and emotional links to brands matter a great deal, the rate of change is likely to be slow. Yet in domains where objective, specification-based quality is important—and can be assessed and communicated—even prestigious brands are not immune.

A Shift in Consumer Behavior

Consumers used to make these decisions relative to other things—a brand name, a list price, or their own past experience with a company. But today, consumers are basing more and more decisions on the absolute value of things.

Relative evaluations are based on comparisons with whatever happens to be most prominent, or placed in front of you on a store shelf or a catalog page. But absolute evaluations go beyond those constraints to use the most relevant information available about each product and feature, and they usually produce better answers.

A technological revolution is driving this shift, as various new tools help us assess the quality of products and services we’re considering. Aggregation tools, advanced search engines, reviews from other users, social media, unprecedented access to experts, and other emerging technologies—these things enable consumers to make better decisions without having to rely on relative evaluations.

Through the 20th century, the practice of marketing was largely intended to communicate values relative to reference points. But what would happen if one morning consumers woke up and were suddenly able to assess absolute values?

Planet Absolute

Let’s imagine a planet—we’ll call it planet Absolute—that is almost identical to planet Earth. There’s only one difference: Before you buy something on planet Absolute, you press a magic button and know everything you want to know about it—you know exactly how good or bad that product or service is going to be, and how you will like it after using it. Economists would call this “perfect information.”

How would people make decisions on planet Absolute?

They wouldn’t rely on a brand to determine the quality of a product. They would just press the button. They would not be too impressed by the fact that a product is made in Germany or any country with a reputation for quality. They would just press the button. They wouldn’t care as much about the fact that they loved the last model from the same company.

A state of perfect information is, of course, theoretical, and we obviously will never reach the hypothetical planet Absolute. But in more and more areas of life, we’re starting to get closer to absolute values, which make us less dependent on relative evaluations. The human brain is not changing, but a fundamental shift in our information environment is under way, with far-reaching, evolving implications for consumer decision making.

“A shift in our information environment is under way, with far-reaching implications for marketers.”

Today, review sites (whether Amazon or CNET, Yelp or Zagat) tell us about the reliability and usefulness of products, and help us predict the experience we can expect at restaurants or hotels. Through social media, it’s become almost effortless to get recommendations from friends and acquaintances. Post a question on Facebook or Twitter (“Can anyone recommend a camera?”) and you’re likely to get personalized advice from an expert in your own network.

In fact, people already use—and trust—these tools.

“Research done in 2011 found that the average shopper consults 10.4 information sources prior to purchase.”

Two issues are worth addressing here. First, can these technologies be manipulated? No doubt some companies try (and always will) to game the system—for example, by planting positive reviews. Reviews are not perfect, but one solution that consumers are not turning to is trusting marketers as the main source for information regarding quality.

The second issue: Is the wealth of information creating tremendous clutter that makes decision making even more difficult? Many observers use this concept to support their belief that brands and loyalty are more important than ever. Yet the Web provides effective tools for sorting and using the most relevant information. In most real-world buying situations, options are already well sorted. And with the steady improvement in information and sorting tools, the overload problem will become even less significant.

The cumulative effects of these technologies, and their dramatic impacts on how consumers make decisions, pose a major challenge to established ideas about marketing and related business functions. Simply put, they make influencing consumers through relative tactics and cues, such as brand and price, much harder.

The implications for consumers and businesses are enormous. First, the new reliance on absolute value means that, on average, consumers will tend to make better decisions and become less susceptible to context or framing manipulations. For businesses, it means that marketing is changing forever.

 

This article by Itamar Simonson & Emanuel Rosen, is adapted from Strategy+Business.

Full article: http://www.strategy-business.com/article/00247?pg=all

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About Georges Abi-Aad

CEO, electronic engineer with MBA in marketing. Multicultural; French citizen born in Lebanon working in the Middle East and fluent in French, English and Arabic. I have more than 30 years of proven experience in the Middle East with European know how. I am good in reorganization and in Global strategic management business. I am a dependable leader with an open approach in working with people, forging a strong team of professionals dedicated to the Company and its clientele. Perseverance is my key word. Married to Carole and having 2 children: Joy-Joelle and Antoine (Joyante!).
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