Invisible social incentives may encourage customer loyalty over time.

Invisible social incentives may encourage customer loyalty over time

Why do we see loyalty to companies such as Apple, or Sony, even if the products released by these companies are inferior? Why do people in America attach emotionally to certain "name brands"?

1. If the theory that behavior emerges from the environment is correct (operant conditioning/behaviorism).

2. And if it is correct that incentives determine behaviors (microeconomic theory, picoeconomics).

3. Then we would have to ask what incentives are creating irrational behavior in customers.

If a customer pays more for an Apple phone which has the same or worse features than a phone without the Apple name then it means customers are paying for the Apple name. This is because to be seen as a good person in society (to be socially desirable) might require using certain products even if those products are inferior or cost a lot more.

The concept of "Social Credit" which China uses is explicit and determined by the government. The social credit exists everywhere though and China did not invent it. Anywhere we see social rewards and social punishments we are seeing "social credit".

Social desirability bias reflects the fact that there are different social rewards and social punishments for different behaviors. If wearing an Apple iPhone makes a person look better to potential mates then they will do it. If being loyal to Apple (or Chinese equivalent Huawei) results in positive social consequences then people will do it. This is the case if all behavior is determined by perception of expected rewards weighed against expected punishments.

Because social rewards are invisibly distributed (unlike Social Credit in China) we have no way to really know whether customer loyalty is a natural trend or if it's a status competition side effect.

Summary

• Humans may buy certain products due to the perception that it will make them more socially desirable. Similar reasons exist for why people may choose to obtain a college degree (signalling)

• There may exist invisible social reward distributions in society. If the group of persons classified as the "good" are added to the whitelist then they would receive the rewards. If buying a certain product is perceived to get a person put on the "good" side or whitelisted then many people would buy the product and be loyal to the company as well if buying products from that company get them perceived as good.

• If certain companies are seen as "good companies" and customers who buy from these white listed companies are seen as "good people" then an invisible social credit system exists. The perception of being good is to be socially desired, and this is a reward. To be socially undesirable is the social punishment.

• When all of your purchases are transparent then there is no way to determine which of your purchases were for fashion or because you actually prefer that product.

References

1. https://edition.cnn.com/2018/12/11/business/huawei-apple-china-tech-us/index.html
2. https://en.wikipedia.org/wiki/Signalling_(economics)
3. https://en.wikipedia.org/wiki/Social_exchange_theory
4. https://en.wikipedia.org/wiki/Microeconomics
5. https://en.wikipedia.org/wiki/Behavioral_economics
6. https://www.picoeconomics.org/
7. https://en.wikipedia.org/wiki/Social_desirability_bias
8. https://en.wikipedia.org/wiki/Reward_dependence