Brand Loyalty Is (Almost) Dead
Most marketers believe that the Internet is a fabulous tool for building strong brands. However, according to a fascinating article in The New Yorker recently, the Internet may be making brands irrelevant.
To understand why this is true, one must first understand why branding was originally valuable to both buyers and sellers.
To buyers, a brand served as a guarantor of quality and consistency. If you had a good experience with a branded product in the past, you would naturally assume that you would have a good experience with another product by the same brand.
The customer's predisposition to buy a particular brand reduced sales cost while allowing the seller to charge more for the product, even if it was virtually identical to a non-branded competitive product.
In other words, companies invested in branding to increase their profit margins. That no longer works. Here's why:
The Web Makes Loyalty Moot
The Web weakens and destroys brand loyalty in two ways:
The first is the ready availability of user reviews and competitive data. Because it's now so easy to find out if an individual product is excellent or a piece of crap, buyers no longer need the brand as a guarantor of quality.
In other words, I'm more likely to check online for the best SUV in my price range rather than simply buy another Honda because I like my old CRV.
The second way the Web destroys brand loyalty is that it provides the infrastructure for outsourcing to supply chains in the developing world. As a result, most products are pretty much the same, regardless of whose brand has been stuck on them.
PCs are a case in point. With few exceptions, all PCs (regardless of brand) are slapped together from the same components manufactured in the same factories and assembled in the same place. The only differences are the trim and the logo.
As a result, PC brand loyalty is pretty much kaput. When was the last time you heard somebody brag about how much they loved their PC brand? The same is true of other product categories.
While people might praise and continue to use a particular product, they're not likely to buy a different or follow-on product simply because it shares the same brand.
Only Children Believe Brand Promises
There are exceptions, of course. Kids, for example, can be very brand conscious. My 9-year-old son, for instance, just had to have Converse hi-tops.
However, that kind of brand loyalty is an artifact of immaturity. Children and child-like minds are easily impressed by celebrity endorsements. In any case, there's no loyalty there; next year I have no doubt my son will want some other brand just as avidly.
As he matures, my son will probably (hopefully) reach the conclusion shared by the majority of educated adults: that brand is meaningless as a predictor of quality because, aside from the logo, it's all the same junk made in the same factories.
As I write this, I can already sense that some readers will cite Coke and Apple as counter-examples. They aren't.
Why Coke and Apple Aren't Exceptions
Coke doesn't have brand loyalty; it has product and distributor loyalty. People drink Coke because they like the way it tastes, not because it's Coke. And they drink more Coke than Pepsi (insofar as it tastes the same...opinions differ) because Coke has a better distribution network.
Similarly, despite appearances, Apple doesn't command brand loyalty, per se. Apple has had a series of hit products that all work together well, thereby creating product loyalty.
However, if Apple released something weird that didn't work well with its other offerings, everyone on the Web would immediately know that and the product would flop. As indeed has happened to Apple in the past.
To summarize, in the Internet era, brands no longer command much (if any) loyalty, which makes branding less able to increase profit margins, thereby making it less effective as a marketing investment.
The implications are clear: Companies that want to be successful should spend more money on building and publicizing great products rather than building and publicizing their brands.
Pre-order my new book and get an exclusive bonus chapter (for you and a friend) and a signed bookplate.
GEOFFREY JAMES | Columnist
Geoffrey James is an author, speaker, and award-winning blogger. Originally a system architect, brand manager, and industry analyst inside two Fortune 100 companies, he's interviewed over a thousand successful executives, managers, entrepreneurs, and gurus to discover how business really works. His most recent book is Business Without the Bullsh*t: 49 Secrets and Shortcuts You Need to Know.