This is the second of a two part blog post on the myth of the empowered consumer. The first part asked how we could consider consumers empowered when companies were encroaching on their time. This one asks how we can consider the consumer empowered when the information asymmetry in favor of the seller has never been greater.
At the dawn of the web, one of the greatest fears of businesses was price transparency – that consumers anywhere could find the cheapest price at the click of a mouse. Markets were about to become more “perfect” in that consumers would have immediate knowledge of prices everywhere. And as everyone knows from economics 101, in a perfect market prices drop to marginal cost, wiping away any hope of extraordinary profit. There is just no shelter from the harsh winds of competition.
Fast forward a decade and a half, and what you find is that, yes consumers can switch to a less expensive supplier, but often they don’t. If you have an account at Amazon.com, are you really going to switch to another bookseller or online retailer and set up a new account to save a couple of dollars on one purchase? When Netflix knows exactly what movies you like, and can recommend them for you, are you really going to switch to a different movie supplier for a deal on a Friday night rental? Are you really going to switch to Diaspora when all your friends are on Facebook? Is there even an alternative to Linkedin? There are brands you trust on the web, just as there are brands you trust off the web – and you’re willing to pay a small premium to do business with trusted brands.
If consumers' power came from their ability to compare and switch, it has eroded considerably over the past decade on the web, and shifted back to sellers.
One outcome of the erosion of consumers’ power is that they barely complain when they are asked to give up the most valuable currency in the information age: information about themselves.
The web is a gigagntic information gathering machine – every click is monitored, every choice is correlated, and every movement is measured.
Facebook uploads users' contact phone numbers from their smartphone to their account without their opt-in; Linkedin uses users' profile information in ads; most online retailers offer differential pricing (coupons) based on users' browsing profile and purchase history. Users' search engine entries and e-mail are analyzed for key words so they can be targeted as a consumer.
A couple of decades ago it was considered a threat to democracy when citizens' library book borrowing was monitored by the government. Today, consumers have handed over far more detailed information about themselves to businesses, simply by clicking through the web.
Marketers know exactly who buys what when, and at what price. And much, much more.
Empowered consumer or a rat in a laboratory maze?