Bringing Back Brand Loyalty

Online staff -- Electronic News, 10/28/2005

Brand loyalty isn’t what it used to be in the consumer electronics (CE) space, according to ABI Research, which noted in a recent report that purchasers of home electronics devices face a market flooded with ever-cheaper products from manufacturers few have even heard of.

Product lifespans -- even from vendors that are household names -- have grown extremely short, and when devices break, repair costs often equal replacement, the firm said. Under these conditions, ABI Research is not surprised that jaded consumers increasingly buy on price and features alone.

Unable to compete on price with thousands of agile startups producing commodity goods in low-wage markets that are just as good and much cheaper than name-brands, the established vendors have a problem: how to leverage their brand recognition to retain customers.

"Neither technology nor brand is a differentiator anymore," said Vamsi Sistla, ABI Research's director of broadband research, in a statement. "And vendors treat long-time customers exactly the same as new ones. Locking customers in with proprietary formats may work in a new market, but it won't fly in an established market.

“But one way CE vendors can increase loyalty is by creating 'trade-in channels,’ which allow users to return their used goods for a discount on purchase of a same-brand replacement. This not only helps retain customers, it provides a flow of recyclable parts for use in remanufactured or new lower-end products," he said.

Sistla further suggested extend product life with upgradeable designs and updates to software, drivers and applications. "Once consumers realize that if they stick to one set of brands, their products can have life-cycles longer than six months, they will become more like continuous subscribers,” he said. "The majority of low-end, new-brand vendors could not do that, because they don't have the R&D budget or marketing clout to make it happen."