Startups are good for economy. Startups are good for buyers. Startups are good for everyone in the society. Startups have immense potential of creating local employment and absorbing local talent. Startups also give a lot of business to local small scale vendors. Because of startups, buyers get a wide variety and highly customized product, catering to their part of the ‘long tail’. On the face of it, startups look so, so good. But still, many of the leading startups have changed the consumer mentality in a very harmful way.

Just a decade ago, brands used to sell on loyalty. The consumers or the buyers were loyal to a brand. Not like they never switched to other brand. If any of their trusted brands broke the promises it made, the buyer switched to the other brand. Trust was the parameter driving or ruining the business.

Now have look at the situation today. A typical buyer uses any particular brand till it gives a discount or only till it is running an offer. Once the discount or offer is gone, the buyer finds out the next brand giving similar discounts and the buyer switches. All that money which could go in increasing customer loyalty, is going into making them disloyal through discounts. As a result of this game of discounts, the buyer has become more selfish and disloyal.

Sadly, as a result of using discounts or offers as a strategy for customer acquisition and retention, a startup gets a little bit of success in attracting new users but it fails utterly to get further business. The pool of customers which it initially got, eventually runs to other brands. So many startups died this way in past couple of years.

On the contrary, one can find many brands which work by leveraging the loyalty and are growing slowly but steadily. Unfortunately, though people use Ola, Uber, Groffers or so many other services, they mostly look at them as transactional associates and not as ‘brands’. The guy who uninstalled one particular app last week and installed the other, won’t hesitate a bit to uninstall the later one and install a third app which offers a better discount. And so on…

Any idea where this is going?

 

 

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