Over the last decade, technology companies like Amazon, Apple, Google, and Facebook have risen to the top of brand value lists by outgrowing many of the traditional consumer companies like Disney, Toyota, and McDonald’s. There are many factors driving this rapid growth in tech brand value, but a large portion of the growth can be attributed to the virtuous cycle of data for tech companies. Technology companies know their customers, even anonymously, much better than the companies behind traditional consumer products, and they use that customer data to continuously improve their products which, in turn, drives brand affinity and loyalty.
Unlike traditional consumer companies, tech companies typically have a direct relationship with their end consumers. This gives them access to more data on how customers use their products, and they can use this data to directly inform product development, creating better user experiences. As the product gets better, users in turn share more data, which further accelerates this cycle of faster innovation and better products.
For example, after buying an iPhone at Best Buy, users are asked to register for an iCloud account in order to access the Apple App Store and other Apple services, and this allows Apple to customize its service offerings based on data collected from that iPhone. By continuously collecting usage data and iterating on customer feedback, Apple can build great customer experiences.
On the other hand, if that same customer were to purchase a bottle of Coca-Cola on their way out of the same Best Buy store, Coca-Cola would only receive high level sales data and would not be able to iterate on its pricing, packaging, and product in response to customer behavior as quickly.
To illustrate the speed at which technology companies can quickly close the loop between customer feedback and product updates, take a look at the recent issue discovered by Consumer Reports with the braking of the Tesla Model 3. Just seven days after the report was released, Tesla issued an over the air update that addressed the problem and reversed the Consumer Reports review of the car. Imagine this happening at GM or Ford.
Another example is Amazon’s step into building its Amazon Basics brand. These products are designed around the attributes that customers find most important, and these attributes can be inferred from reviews, purchase behavior, and even usage data on some of their devices. Examples of what you see when buying Amazon Basics products are better packaging for electronics, simplicity of design, and easy-to-digest product descriptions. The results show this process of listening to customers and quickly iterating on products works. Amazon’s private label products will earn hundreds of millions, if not billions, in revenue this year.
In addition, Amazon has begun opening physical stores to take its learnings from the digital world to the world of physical retail. For example, it can use data of what books are most popular with readers in the Seattle area to influence what it displays in its bookstore in the University Village shopping center in Seattle.
By opening up physical bookstores and Amazon Go cashier-less stores, Amazon can now close the loop between their digital shoppers and physical shoppers to create custom retail locations that leverage both sets of data. Like we have seen with companies like Indochino and Warby Parker, combining digital and physical customer experiences is a powerful combination and allows companies to have more touch points with their customers. (Disclosure: Our firm is an investor in Indochino.
