The Myth of Consumer Empowerment in the Face of the Crappification of Almost Everything

Yves Smith says James Surowiecki is full of it, and that most everything has become crap. Commenters pile on:

http://www.nakedcapitalism.com/2014/02/james-surowiecki-promotes-myth-consumer-empowerment-face-crappification-almost-everything.html#comments

There’s nothing like getting a missive from the alternative reality where neoliberalism works and all consumer problems can be solved by more diligent shopping (and remember, since we are all consumers first and citizens second, the corollary is that pretty much any problem can be solved by better shopping).

The current sighting is a story in the New Yorker by James Surowiecki, The Twilight of Brands, that tries to tell us, in all seriousness, that companies now have to be on their toes because consumers are more vigilant and less loyal. He starts with the backlash against yoga clothes maker Lululemon when quality fell sharply, and states his thesis:

It’s a truism of business-book thinking that a company’s brand is its “most important asset,” more valuable than technology or patents or manufacturing prowess. But brands have never been more fragile. The reason is simple: consumers are supremely well informed and far more likely to investigate the real value of products than to rely on logos. “Absolute Value,” a new book by Itamar Simonson, a marketing professor at Stanford, and Emanuel Rosen, a former software executive, shows that, historically, the rise of brands was a response to an information-poor environment. When consumers had to rely on advertisements and their past experience with a company, brands served as proxies for quality; if a car was made by G.M., or a ketchup by Heinz, you assumed that it was pretty good. It was hard to figure out if a new product from an unfamiliar company was reliable or not, so brand loyalty was a way of reducing risk. As recently as the nineteen-eighties, nearly four-fifths of American car buyers stayed loyal to a brand.

This is utterly backwards. The reason “brands have become more fragile” does not not reside in demanding, disloyal customers, but in short-sighted corporate behavior. Surowiecki does point to the early 1980s as the beginning of the sea change, but the driver was a shift away from businesses focusing primarily on good old fashioned success in the marketplace (via matching product quality/price attributes versus customers needs, improving manufacturing processes, looking for new product/technology opportunities, etc) to focusing much more on financial results as the key determinant of success. That orientation arose as raiders, later rebranded as leveraged buyout firms, and now private equity, took over companies, sold unproductive assets, piled on debt, and pushed hard to wring out costs. While many companies were so fat that a lot of overhead could be reduced without affecting production and marketing, the pressure to reduce costs soon moved into areas that involved manufacturing and product quality. Companies began subtly, and then more overtly, lowering product quality and running on brand fumes.

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