Wednesday, February 6, 2008

Loyalty drivers that Apple and Microsoft miss

There’s an easy yet effective way that major companies can inspire their current consumers to stay within the brand and not defect when the time for repurchasing rolls around.

The principle is simple: Recognize the investment the consumer has already made in the relationship and reward accordingly.

It’s standard practice in certain categories such as automotive, who offer a trade-in on existing models.

It’s not just huge ticket items either. Finis, makers of a second generation waterproof mp3 player (below) are offering a discount for owners of the original version, retailing at about $180.














The reasoning is simple: help a consumer unlock a fair residual value in his existing product and he’ll be more likely to buy a new replacement. But it goes beyond economics to something altogether human and valuable when it comes to profitable relationships: respect. This quality is all too absent in many brands strategies yet it does much to inspire attachment and loyalty.

The reason why Apple and Microsoft haven't ventured down this road is no surprise: they feel they don’t need to and focus on maximizing profits. Consumers don't expect a trade-in with computers the way they do for other categories. Certainly, with new marketplace mechanisms like eBay, consumers can dispose of their older version on their own more easily than they could in the past (though that responsibility is still left with them).

Overtime, however, it can leave customers feeling like they are paying too much to continue the relationship. One of our OFD staffers is about to acquire his third laptop. An Apple clamshell and Titanium G4 Powerbook sit on a shelf. In seeking a new, faster model, he’s considering defecting brands. $3800 has already been spent on hardware and animal-themes upgrades of OSX over time. Yet when he steps inside an Apple store to contemplate the purchase of the new Airbook – or any other computer – his loyalty is unrecognized: his value to the company is seen no differently from a potential first-time buyer.

As with any relationship, what incentive is there to stay in it when you don’t feel valued?

1 comment:

Julie, writer surefirewealth.com said...

Didn't Ikea do something similar like this recently? They arranged for consumers to be able to trade their furniture with other people and with Ikea products as well. I heard it even allowed non-Ikea products to participate. However, if memory serves me right, they've only done it in Amsterdam. With technology, I suppose you're right. People would have to buy new gadgets to replace their old ones.