How Brand Loyalty Is Changing As Consumers Become Users, Not Buyers

As the returns to digitization supported by venture investment encourage the growth of access rights rather than ownership, consumers' relationship with brands is evolving as are financial values. 

While research has long supported the belief that customers are more loyal to the things they own rather than rent, the value of experience as an asset has increased, increasingly moderated by the platforms through which those intangibles are provided. The result for venture capital and other investors is that - as in the case of Facebook - the financial impact may eventually be comparable but the locus of brand equity is shifting from the specific product to ostensible 'membership' in the entity which provided the opportunity. JL 

Carey Morewedge reports in MIT Sloan Management Review:

Businesses are moving to a new value proposition, offering consumers temporary access rights to experiential goods. Fueled by digitization and technology-mediated platform markets, consumption of goods and services is evolving (as) we replace private ownership with temporary access, and exchange material goods for their experiential substitutes. (But) we like things we own more and value them more than things we don’t own: consumers are willing to pay less for digital goods than for comparable physical goods. Psychological ownership may be preserved if people develop stronger relationships with the platforms, brands, communities, and devices that provide access, rather than with material goodsBusinesses are moving to a new value proposition, offering consumers temporary access rights to experiential goods — and it’s inevitable that this trend will have implications for brands’ relationships with their customers. 

This evolution in consumption, from a society of “owners” to one of “users,” gives us more access to a greater variety of goods at cheaper prices and reduces our carbon footprints. The cost is a reduced sense of psychological ownership of individual goods — the feeling that a thing is mine — but this decline may be offset by changes in how, and for what, we feel ownership. As our enduring relationships with concrete objects wane, our feelings of ownership for abstract concepts like the ideas, groups, and brands with which we identify should also rise. Here’s what businesses should understand about this evolution and its future consequences.

The Increasing Value of ‘Experience’ 

Fueled by the rise of digitization and technology-mediated platform markets, our consumption of goods and services is evolving along two dimensions. First, we are replacing private ownership of goods with temporary access rights, and second, we are exchanging material goods for their experiential substitutes. For example, long-term ownership of a car can be replaced with on-demand use of car- and ride-sharing platforms like Zipcar and Uber. We are boxing up libraries of physical media — books, CDs, DVDs — in favor of subscription platforms where we stream digital. Even our data is migrating from paper records and physical hard drives to corporate cloud-based platforms. In this exchange, we forgo the bundle of rights that comes with private ownership of physical goods for temporary access rights to experiential goods. 

Access-based consumption is not new: It’s how we have traditionally availed ourselves of amusement parks and country clubs, libraries and hotels, public transportation and taxis. Technology-mediated platform markets, however, are accelerating and broadening the diffusion of access-based goods. Uber drivers made more than 1 billion trips in 2020, in the middle of a pandemic, and streaming is now the most common way to listen to music. 

Access-based as-a-service consumption models offer many real benefits. We can temporarily consume goods that we otherwise could not afford or would not want to permanently own. We can rent a backyard pool for a party, hail a black car for a date, and wear red-carpet celebrity-designer clothing to galas and weddings. We can download the perfect book or song or movie from our couch at home or at the beach. Access-based experiential consumption curtails the environmental impact of our modern lifestyle. 

But giving up private ownership comes with a cost: a decline in psychological ownership. We can feel psychological ownership for concrete material goods like a car and for abstract notions like an idea, a neighborhood, or a right. Psychological ownership can be established consciously when we explicitly assume ownership of a thing (with the closing signature on a house, for example), or unconsciously, when we develop psychological associations between a thing and ourselves. These associations occur when we feel we control a thing, invest resources in it, or know it well, or when it reflects crucial facets of our identity. This is why you might feel psychological ownership for a project at work, an office, a seat in the conference room, or your company — even if these are legally owned by someone else. 

Psychological Ownership Enhances Value 

We perceive things we own to be a part of us, and we extend our positive self-perception to the things we own. We like things we own more and value them more than things we don’t own: For instance, we demand more when we try to sell a particular good than we would be willing to pay to acquire it ourselves. For businesses, such value-enhancing effects of ownership are (mostly) worth preserving: They reduce price sensitivity for goods, services, and brands while increasing positive word of mouth, satisfaction, and loyalty. As the psychological ownership we feel for the things we use declines, so too should there be a corresponding decline in how we perceive the value of the things we use. Indeed, consumers are willing to pay less for digital goods than for comparable physical goods. 

These trends suggest that psychological ownership is on a downward trajectory, but it may also be transformed and preserved if people develop stronger relationships with the platforms, brands, communities, and devices that provide access to goods, rather than with the individual material goods and particular services they consume. 

One reason is that material goods tend to be thought of at a low level of abstraction, whereas corresponding experiential goods are thought of more in the abstract. When thinking of a car, for example, we focus on its physical features; when thinking of a road trip, we think of its purpose and meaning, and with whom we are traveling. The car we use to take the trip becomes incidental. This is likely to increase feelings of ownership for the platforms through which we acquire access-based experiential goods. Indeed, consumers who feel greater psychological ownership for car-sharing and music-streaming services use those services more often and see them as better substitutes for private ownership of cars and music. 

We may also develop closer relationships with platforms or services than we had with privately owned physical goods because our relationships with access-based material goods are temporary, but what we do expect to endure is our relationship with the services and devices we use to access them. Our strong attachment to and identification with our phones, for example, may reflect their role as the portal through which we access our digital media and online social lives. 

Cultivating a New Sense of Ownership 

How should companies respond to the changing nature of ownership? At a broad level, businesses will need to take steps to avoid commodification. 

Brands with significant market share, brand equity, or capital may benefit from direct sales to their consumers to keep control over their relationships with consumers and maintain their distinctive brand identity. For example, Disney pulled its subscription-based content from other platforms, where it was intermingled with other family-friendly fare, and made it exclusive to the Disney+ platform. The strategy should preserve Disney’s brand equity and unique positioning in the eyes of consumers. Automakers like Volvo are directly offering their cars on a monthly subscription basis to fend off commoditization. 

When consumers require a mix of goods or services that are difficult for one brand to supply, businesses may retain control over their relationship with consumers by creating intermediary devices or platforms through which a variety of branded experiential goods and services are consumed. The Kindle is such a device, and Amazon provides both the device and a platform. This is easier said than done, however: A minority of platforms succeed, and cultivating a connection to a device or platform requires that consumers feel a sense of control, make investments of time or money, and see the brand as an expression of their identity. 

Brands that continue to work with intermediaries will need to carefully manage their exclusivity by curating how their offerings can be accessed. Automotive brands negotiating with ride- or car-sharing platforms like Uber and Zipcar could avoid commodification by negotiating the exclusive use of their brand on a platform, essentially making the platform a brand extension of the automaker. Brands could also develop platform-specific products or encourage the use of an existing product, as General Motors is attempting to do through driver discounts on its Bolt EV. If neither option is feasible, brands may be better off avoiding the platform. 

Companies might increase psychological ownership for experiential goods by guaranteeing extended access, such as offering long-term contracts for popular content. Businesses “selling” digital goods may need to be even more strategic in the way they manage long-term rights. For example, many of us erroneously believe that we are purchasing ownership rights to a copy of a digital book, when we are actually purchasing long-term usage rights. This misunderstanding can create a backlash when platforms terminate those rights, even if they reimburse consumers, as when all users of Microsoft’s e-books lost access to their digital libraries when the company abruptly shut down its book platform. 

Cultivating a State of Ownership

 

We feel psychological ownership for a host of things that we do not legally own, and there are well-identified cues that foster this implicit or intuitive sense of ownership of an experience, such as greater choice or more control. The latter can be enhanced through user interfaces with haptic touch-screen controls and by allowing consumers to determine when, where, and how quickly they consume goods. Reminding users of the time and effort they’ve invested in platforms, brands, and communities through gamification, status levels, and reminders may leverage that self-investment in a way that deepens their sense of psychological ownership. For example, Duolingo’s language learning sends users frequent notifications reminding them to practice skills acquired and keeps them engaged with features like leaderboards and rewards such as badges and points. 

Finally, marketers will do well to keep in mind tried-and-true relationship-building strategies, such as educating consumers about a brand’s unique history and products, and encouraging use of the brand for self-expression or to signal membership in a social group. 

Our evolution from a society of owners to users is an exciting change that confers many benefits and a necessary change for the future of our planet. A mindful approach to its psychological costs may help consumers and businesses see value in their new relationships with the things people consume.