The Ill Will Effect on Business

In an article by Glenn Derene entitled "The Ill Will Effect: Who really likes their Telco Provider" in popular mechanics the author discusses a phenomenon called the “Ill Will Effect” and how it can have serious consequences for businesses.

In short the "Ill Will Effect" describes a market condition where consumers don't trust, or like, a company they are doing business with but feel they have little choice but to use them. At this point I am sure you are scratching your head to figure out what this has to do with eCommerce, but I think we can all gain some strategic insight from this article.

The article primarily focuses on telcos and cable companies and how individuals perceive and attach value to their brands. The author points out how some industries (i.e. telecoms and media) have benefitted from high initial establishment costs which limit competition and thus provide consumers with few options. This market dynamic has allowed these companies to be less worried about losing customers to competition, and subsequently suffer from poor customer service and brand risk.

The risk to the brand comes from consumers who may start to view their carrier companies as the “least evil” option. Once consumers become tired of the poor service they start looking for alternatives that provide similar services for similar costs. In this case large incumbents become vulnerable to smaller start ups that are more in-tune with consumer demands. Large incumbents that want to hold market share must protect their strategic positions by listening and addressing consumers’ concerns and demands.

Netflix, a little mail-in DVD online service, took Blockbuster by storm by offering a more convenient way to rent movies without late fees. Similarly, Skype has utilized low-cost VOIP to gain a substantial market share in the long-distance calling market.

All it takes is a disruptive technology and a small nimble firm with a bright motivated entrepreneur to take their big idea and turn an industry on its head. If you aren't willing to solve your customer's problems with your business model or an industry's business model, all it takes is one great idea to flash inside the head of an entrepreneur to remove the problem from your bottom line.