• 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.
 
 
by James Heskett

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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