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Published: May 12, 2014
 / Summer 2014 / Issue 75

 
 

Is Tech Eroding Consumer Loyalty?

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

When Jonney Shih started talking about selling laptops under the Asus brand, it didn’t raise too much concern among established players in the PC industry. Shih is the chairman of ASUSTeK Computer Inc. (known simply as Asus), a Taiwanese company that was a contract manufacturer of notebook computers and game consoles. Although Asus was well respected among industry insiders, few consumers were aware of its existence. Conventional wisdom holds that you need to build a trusted brand in order to get people to open their wallets, and establishing a brand is notoriously expensive. Friends and colleagues warned Shih that he wouldn’t get far without brand awareness, name recognition, and heavy advertising.

Yet by 2013, it was clear they were wrong. In 2012, Asus reached fifth place in worldwide PC sales, experiencing prominent growth even as overall industry shipments declined. In the first quarter of 2013, Asus reached the number three position in worldwide tablet shipments, according to IDC.

A Shift in Consumer Behavior

How could a company be so successful with almost no initial brand awareness? Shih, and the US$15 billion company that he heads, have benefited from a fundamental shift in the way consumers evaluate and purchase products and services. 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.

To be clear, the term absolute value doesn’t mean the absolute best option (assuming that an absolute best option even exists). Instead, it means a “good enough” solution, which can vary depending on the individual and his or her subjective tastes. The point is that today people can more easily determine the absolute value of something to them—and get closer to knowing what their experience will be with an individual product.

Here’s one way that Asus benefits from the shift away from relative evaluations. In the old days, consumers used their own past experience with a brand as a key quality proxy. When Jane was thinking of buying a new laptop, the most accessible piece of information might have been in her memory: “In the past, I used a Dell laptop that worked fine.” This was an easy reference point to use, and it led Jane to conclude that the new Dell models on the market must be good too. Some of this way of thinking will continue, of course, but today Jane can go online and easily find out much better information about any model made by Dell, HP, Asus, or any other company. When quality can be quickly assessed, people are less hesitant to try something new, which means that newcomers like Asus can enjoy lower barriers to entry.

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?

 
 
 
 
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