04 Jun 2014  What Do YOU Think?

Does Internet Technology Threaten Brand Loyalty?

Internet technologies may not kill off brands, but they certainly magnify both the bad and good decisions of marketers. Jim Heskett's readers weight in on this month's question.

 

Summing Up


Is the Potential Negative Impact of New Information Technologies on Customer Loyalties Overstated?

Customers will remain loyal to brands that meet their needs, regardless of the effects of new information technologies on their general knowledge about products and services. But new information technologies will punish weak brands faster and more severely than in the past. That's the general sense I received from responses to this month's column.

There was a minority opinion, however. As Carl P. put it, "If you have more information to make what you consider to be an informed choice, why would you have to be brand loyal?" Consumer loyalty, he continued, "will vary and fluctuate on a technological continuum of innovation/change (loyal one day and maybe not the next)." Based on personal experience, Ed Kensinger said that his exposure to a superior product and service on the Internet "could never have happen(ed) before … and pose(s) a threat to brand loyalty." If there is a weakness in your offering you are at risk.

Others were reluctant to reach such a judgment. In concluding that this is not an either/or choice, Nuno Cintra Torres commented that some people will always need references such as brands. Others will be more adventurous, enjoying the search for new features. "At the core of human behaviour is human biology and that will not change because of information technology."

There were doubts both about the quality of the information delivered by new technologies and consumers' ability to use them effectively. Gabriel pointed out that reviews are highly subjective "so you end up not knowing what to believe… The Internet and social media (don't) always make us better informed." Sergio Zaragoza suggested that this topic is "like the story of King Midas, we will be starved by the excess of golden information."

Still others suggested that marketers have little to fear, especially if they are willing and able to strengthen their brands. As Edward Hare put it, "I don't see the Internet 'technology' as a threat to customer loyalty…. Loyalty is earned by meeting and exceeding expectations. Do that, and you can maintain loyal customers." AIM added, "It is not the advances in information technology that (have affected our loyalties) … but lack of focus on our true needs."

However, there was a sense that new information technology could exact a heavy toll on marketers not able to raise their standards and performance. Gerald Nanninga commented that if marketers have a great story to tell, "the Internet is your friend. If you don't, then failure is accelerated. Think of it as a results magnifier—in either direction."

Is the potential negative impact of new information technologies on customer loyalties overstated? What do you think?

Original Article

The world is fascinated by an international debate about information technology, security, and access to "secrets." Views referenced years ago in this column are playing out in the diverse worlds of national security, spying, and patriotism. Harlan Cleveland's words of more than 30 years ago keep coming to mind: "The information resource, in short, is different in kind from other resources. So it has to be a mistake to carry over uncritically to the management of information those concepts that have proven so useful during the centuries when things were the dominant resources.... These concepts include the notion of hiding and hoarding a resource."

It's clear that information technologies have brought us into a new age of international relations, but they have profound implications for the way we do business as well. For example, a question has arisen about how information both about us and available to us affects our behaviors, specifically our loyalty as consumers and employees.

There are two predominant sides to the discussion of this question. One is that the amount of information about products and services is becoming so voluminous that it will lead to increased consumer confusion. As a result, the use of surrogates (such as brands) in our purchasing decisions will lead to greater brand loyalty, justifying today's massive expenditures to preserve brands.

The other view is that the quality of Internet "technologies," such as search and feedback mechanisms, is improving faster than the proliferation of information. This will give users of the Internet the upper hand in the battle for access to information and the ability to organize it, value it (based on feedback from users), and use it for decision-making.

The authors of a recent book, Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information, believe the latter outcome is the most likely, based on extensive research at Stanford and elsewhere. It will increase the tendency, particularly among younger consumers, to try new goods and services, possibly switching their loyalties. If this turns out to be the case, it calls into question a good portion of marketing beliefs and expenditures regarding brand building and the lifetime value of a customer. It may also suggest different approaches to the management of human resources, specifically methods for retaining employees who will be better informed about the job market.

If true, a better informed and less loyal customer is a big deal for others as well. It's important for those among us who believe that employee and customer loyalty are important determinants of businesses' growth and profitability. It may mean a lot for us as consumers as well, because the effectiveness of the search apps we use will probably be enhanced by the information that others have about us.

Will big data overwhelm us, thereby reinforcing such things as brand loyalty? Or will the quality of our search and valuation devices make us smarter, and less loyal, customers for goods, services, and even jobs? What do your own experiences tell you? Is Internet "technology" a threat to loyalty? What do you think?

To read more:

Harlan Cleveland, "Information as a Resource," The Futurist, December, 1982, p. 37.

Itamar Simonson and Emanuel Rosen, Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information (New York: HarperBusiness, 2014).

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Comments

    • Gabriel
    • Chief Questioning Officer, Questions1st

    It all depends on the type of product and company information that you can find. If it's mostly marketing then you don't learn much. Reviews are highly subjective and can be contradictory so you end up not knowing what to believe.

    My point is that the internet and social media doesn't always make us better informed.

     
     
     
    • Aim

    In my opinion it is not the advances in information technology that made us question our loyalty (which is a virtue for real men) but rather extremely short term attitude, lack of focus on our true needs, lack of reflection on who we are as humans that made us be affected with very little things even as we walk along the pavement (I just hate those large screens with ads on them especially at nights). Loyalty is highly valued virtue in human beings and just because this term is being used in the business world does not make it any less important.

    I guess what I am trying to say is that in becoming more sophisticated at acquiring and evaluating information we as humans have become over-the-line short tempered, ever demanding and quite unreasonable in establishing our needs. The 21st century human has become truly spoiled. Now, please consider this from the view that majority of the world has not left the 20th century and some have barely begun.

    There is nothing wrong with IT advancements (they have contributed in myriads of ways to societies), but we as humans should try to establish our values and basic needs based on our moral beliefs and be courageous and loyal enough to stick to them to not be affected by every little thing that comes along during the daily life. Rapid changes and attempts to adjust to them may make the person in the mirror unrecognizable and often not in the positive ways.

     
     
     
    • Nuno Cintra Torres
    • Owner, NCCT Consultores, Lisbon, Portugal

    I don't think that is either one or the other view. I believe it is both at the same time. Some people will need references, sign posts, tribal amulets, reinforcing elements (brands). Others will be more adventurous enjoying search and looking for new features or price advantages. Information overwhelm is a relative concept, it seems to me. If you read the whole Britannica 100 years ago, you would be overwhelmed. Very few people may have done it. Besides so much of what is on the net is but copy paste. At the core of human behaviour is human biology and that will not change because of information technology.

     
     
     
    • Carl P.
    • Learning & OD Consultant

    Data is only as good as the source/individuals' compiling it. Therefore, big data being used as a means to influence consumer outcomes - can be assigned via the user's knowledge, experiences and degree of association; regarding the/a brand (i.e., providing the consumer with multiple choice outlets for brand viability, usage & consumption).

    Loyalty to one brand or product will become more subjective, as more information continues to enter our "search & valuation" stratosphere. The point is, if you have more information to make what you consider to be an informed choice - why would you have to be brand loyal? Hence, the option to choose the best brand/product or service will be based upon what a consumer deems as the most "contextually viable"; for their personal consumption. Consumer loyalty or not - will vary and fluctuate on a technological continuum of innovation/change (loyal one day and maybe not the next).

     
     
     
    • Varun

    In the world of internet, when users confront with challenges such as choosing among comparable products, they may rely on other user feedbacks to guide their decision making process. A consumer, in the process, may build rapport with an online rating system or a website, evaluates it over a period of time, and eventually relies on the source of information, ultimately leading to proliferation of the brand and its loyalty.

    In one scenario, I had to travel to new places where chosing a restaurant was a major challenge, so I relied on a website that gathers information about small, medium, & large restaurants throughout the country and that collects ratings from users who visit those restaurants. Initially, I compared my ratings of known restaurants to those developed by experts or users. And in the process over a period of time, I could match my instincts to generate nearly accurate results - my predictions matched with correct users. I became a loyal customer to that website.

    While it's a great opportunity to learn about a product from other user experiences, the end result of brand loyalty depends upon how a product or a service fulfils purpose of consumers. Further, consumer loyalty, particularly for frequent switchers, varies from product to product, depending upon whether it's a one-time-purchase product or a product that has services associated with it. One quick solution for businesses to address those fast movers is to rapidly embrace the change.

    Ultimately, the success or failure to gain brand loyalty through internet depends upon how the businesses put into use the technology to best serve the consumer needs.

     
     
     
    • Philippe Gouamba
    • Vice President of Human Resources, Skyline Windows, LLC

    Thank you Professor for an easy question, for once.

    The consumer's ability to easily access product and company information via the internet makes brands both stronger and weaker. With new and easy access provided by the Internet, the consumer has given himself/herself more choices. In the long run what will happen is that the weaker brands will not do well and will be driven out of business as the better brands will gain market share, thrive and strengthen. Businesses that provide a good service and a good product at a fair price have nothing to fear from the Internet or the Internet user's hunger for product information or information on a marketer. Businesses that do not provide good service, good products or fair pricing will be exposed for being sub-par. It has become so easy for consumers to post a positive or negative review on all types of products and services that any business that thinks it can get away with price-gouging and poor customer service is only diluting itself; time and technology are clearly NOT on the side of businesses that operate that way.

     
     
     
    • Gerald Nanninga
    • Principal Consultant, Planninga From Nanninga

    Great brands have a great brand position or brand promise. This consists of a level of perceived superiority at solving a consumer problem (both rationally and emotionally). If your brand position is solid, then the internet will confirm it. If your brand position is weak, then the internet will confirm that. The internet just makes it harder to deceive.

    So if you have a great story, the internet is your friend. If you don't, then failure is accelerated. Think of it as a results magnifier--in either direction.

     
     
     
    • Edward Hare
    • Retired Director, Strategy and Planning, Fortune 250 Industrial Firm

    I don't see Internet "technology" as a threat to customer loyalty. Loyalty is earned by meeting and exceeding expectations. Do that, and you can maintain loyal customers. But fail to innovate and offer new and exciting new products and services and you'll disover the limits of "loyalty". In that case, the internet may simply speed up the process as new choices gain attention.

     
     
     
    • Kapil Kumar Sopory
    • Company Secretary, SMEC(India) Private Limited

    At the outset, let me confess that at least in countries which are not that advanced as far as consumers' access to internet is concerned, the "Big Data" syndrome is not relevant for creation of brand loyalty. In India, except for the upper strata, people are generally more concerned about the cost of items of every day use and hence prefer those which emanate from a manufacturer known since long and/or whose costing is favourable. To illustrate, a rural family while talking of brushing the teeth says " Have you done "Colgate"? " As if this is the only acceptable brand ! Innovations and new developments do not reach such users. and they form the majority. Having said that, relevance of data for shaping consumer preferences is also to be recognised despite some cofusion being created due to excessive data being thrown out through the internet.

     
     
     
    • Sergio Zaragoza
    • CEO, Boton Rojo

    I think that like the story of King Midas, we will be starved by the excess of golden information.

     
     
     
    • Ed Kensinger
    • Brand and visual strategy, a global company

    Only time will tell. from my personal experience, I have used gillette razors for decades and always hated feeling taken advantage of by their over-priced blades (but free handle!). I recently discovered Harrys blades online. Not only do they cost less, the look nicer, are delivered to my doorstep without shipping cost or tax. this type of product and service could never have happen before and in my opinion pose a treat to brand loyalty. positioning or promise, if there is a weakness in your offering you are at risk.

     
     
     
    • Allan Torng

    Consumer opinions are shaped by information input from a variety of sources... including the internet. That said... if a company is seen as being a little lax on, for example, safety issues and that results in injury and death... then that brand name will suffer... as less people will buy that brand/product.

     
     
     
    • suzyspring
    • www.keydifference.in

    We can't compare internet with any other thing. As speaking about loyalty of customer, I agree to the point "employee and customer loyalty are important determinants of businesses' growth and profitability." They both require trust and quality of product/service to remain loyalty to us. Updating the product/service is also important to stay in a business. People likes new things which will make them more comfortable in there day-to-day life. We should make the employee to feel good at work which will lead to job market and good publicity of the product/service.

    This is what I felt while reading this article and new thoughts arises to improve myself too. One should have the habit of accessing the information and organizing it.