The value of branding
There's some complaining over at the Kitchen Cabinet about consumer service, and I'd like to stand up for the gung-ho capitalist position here. Because Dell got some complaints, I want to point out that Dell is well-regarded in the business world, and, if it weren't, it wouldn't be generating the returns on equity it does. When customers have bad experiences, it hurts the company, largely because people like me who hear the stories and are looking for computers will be less likely to buy from them, particularly at a high price.

When Kate previously wrote about her experience, she complained that

I can stop buying their products, but this doesn't mean anything to them. I am just one measly consumer among hundreds of thousands. I can tell my friends. I can just imagine their response: "Oh really? How many friends do you have?"

This is true; so was her experience a commensurately small part of the company. It is as these stories multiply that the brand name should and does deteriorate; Kate no more gets to dictate 10% of Dell's bottom line than do 100,000 Angry Left protestors get to monopolize public discourse on foreign policy, much to their similar seeming frustration.

Smaller businesses are dicier, but many of them do rely on repeat business. That so many small companies fail is attributable to the difficulty in getting enough people to build trust in the company, to take a chance and tell friends about positive experiences, for it to become profitable before it runs out of its start-up money. There is an information problem here, and the entrepreneurs pay some of the cost of solving it, while the customers willing to give a new place a chance pay the rest. People I know go to one of a certain set of places for lunch each day; I would expect that most regular soliciters of dry-cleaning services have regular places they solicit. At one time there was a first time, and they took a chance; sometimes that chance goes badly. Often it does not.

Problems are going to be more noticeable than achievements; we expect things we buy to work, and we expect to get services for which we spend our money. That the exceptions are memorable is human nature, as is to complain about them. Indeed, it may even be productive, provided that we remember that these are exceptions; most of the time, the market works better in practice than even in theory.
- posted by dWj @ 3:50 PM