There are a lot of factors that go into determining whether a company does a good job at satisfying customers' expectations. It isn't enough nowadays to simply encourage consumers to buy or use a product; businesses have to keep customers coming back and do their best for consumers to see them favorably.
Thankfully, Brand Keys, a research firm that quantifies brand engagement and loyalty into its Brand Loyalty Engagement Index, has done the hard work for us. Over the past couple of weeks we've looked at some of the market's top performers in terms of brand loyalty and we've seen a lot of similarities, even across sectors. Many of the nation's top loyalty-generating business are using social media to get personal with their customers, are putting innovation at the forefront, and are keeping prices on many products reasonable.
Today I propose we look at the other end of the spectrum. But rather than approach this on a sector-by-sector basis as we did in the past, I've decided to lump together the five most notorious brand loyalty offenders under one roof. Let's have a look at what mistakes these five companies have made and see whether trends exist that could help us identify and preferably avoid troubled stocks in the future.
Bank of America
It really should surprise no one that Bank of America tied with Citigroup for dead last in the banking category and placed last among credit card providers with consumers. Bank of America's gaffes included trying to initiate a monthly $5 debit card usage fee, which merely infuriated existing customers and sent them to other banks, as well as numerous instances of legal settlements where it may not have admitted wrongdoing, but the public is certainly viewing it in a bad light.
Another instance where there's little surprise is in seeing Dell at the bottom of the list among printers and laptop computers. Dell has struggled -- as have many PC makers -- with the evolution of smartphones and tablets, which have practically eliminated the need for desktop computers and certainly taken a bite out of laptop sales. Jumping aboard the innovation bus later than its peers, Dell's PC and accessories have struggled with the younger generations who are hung up on Apple and Samsung's more eye-appeasing styles and colors.
Not to say that retailer J.C. Penney was ever a hero among cost-conscious shoppers, but I'm not sure I've ever seen a company go from hero to zero in such a short timeframe. Former CEO Ron Johnson tried to do the unthinkable in the retail world and dictate consumer habits rather than let the customer determine Penney's approach. Penney's attempts to wean its customers off sales and institute the store-within-a-store concept failed miserably, with same-store sales falling a whopping 31.7% during the all-important Christmas quarter.
American Eagle Outfitters
I admit that American Eagle was a surprise bottom-dweller among retail apparel stores. Less than a decade ago, its styles were considered cool, and even though I don't shop in American Eagle, its stores usually appear busy, and it offers a niche competitor to Aeropostale on the low end and Abercrombie & Fitch on the high end. However, American Eagle also has lagged its peers in terms of its direct-to-consumer presence and has had inventory hiccups that sometimes necessitate big discounts to move undesirable merchandise.
No list of worst brand loyalty would be complete without BlackBerry, which fumbled its way out of the top spot in smartphone market share with its lackadaisical innovation. The ongoing delays in bringing its new Q10 and Z10 smartphones to market have been almost comical. With Apple introducing a new iPhone once a year and Android devices dominating globally, BlackBerry missed the boat with consumers when it took two years to roll out its new phones. Not surprisingly, adoption of its new smartphones has been so-so at best.
What's the takeaway?
Now that we've had a better look at five of the worst culprits for brand loyalty according to Brand Keys, let's examine some of the takeaways that'll help us identify potentially dangerous investments.
I believe the first point worth mentioning is that innovation is everything. BlackBerry failed to move quickly enough with a new smartphone, taking two years to develop its new operating system, and competitors left it in the dust. Dell, as well, didn't anticipate just how important weight and style were to consumers with regard to its laptops and has seen sales dip as Apple and Samsung products run circles around its own.
Secondly, having the right innovative idea is paramount to success. Some of these companies certainly tried to innovate, but they either chose a sensitive subject or ran with a bad idea for way too long. Bank of America, for instance, should have known that it was barking up the wrong tree when it tried to implement a debit card usage fee. J.C. Penney, on the other hand, should have figured out long before a year passed that its new sale-less strategy wasn't working. Trying new things is great, but understanding whether they're a touchy subject with consumers or if they're just not working quickly is even better!
Public image is also important. American Eagle Outfitters rarely finds itself as a regular at the bottom of this list, so it has a good shot at repairing its product offerings and improving its online experience and pricing for consumers. On the other hand, Bank of America is what you might call a regular among America's most-hated companies, so it could be difficult to change that public perception -- especially since few people really "like" their bank anyway. Investors like to buy what they know and put their money behind products they trust, which makes companies like Bank of America a tough sell.
Can this hated bank head even higher?
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The article 5 Companies With Terrible Brand Loyalty originally appeared on Fool.com.
Fool contributor Sean Williams owns shares of Bank of America and Dell, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Apple, Bank of America, and Citigroup, and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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