Wholesome Marketing Ideas, Bite Size

Wholesome marketing ideas, bite size

Sunday, August 28, 2011

The myth of the empowered consumer – II

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?

4 comments:

Jill said...

That is so true. I am always afraid of leaking personal information online to unknown parties. Yet many companies require us to fill out a whole list of information from head to toe for just checking out their final price plus delivery. A shocking discovery a few days ago was that my home address and telephone number were publicly listed on a website. When I called the telephone company to silence our personal information, I got to know that I had to pay a fee each month to have my information silenced. How ironic.

Nicole Haggerty said...

Hi Niraj, well, I can't whole heartedly agree with your last two blogs.

Empowered or not? Well, suffice it to say - online banking - YAY! online travel agencies - - YAY! book/travel/movie recommendations from 'people like me' - YAY! Pay at the pump and not wait in line - YAY!. At the end of the day, I think it comes down to a value proposition of my time vs. the value I want. When I can easily do something myself and doing it myself has learning or time saving value - bring it on. But there are limits - and I can agree with some of your examples. It's no doubt different for everyone.

That brings me to the second blog. First, I'm not sure the 'compare and switch' model is the only way to examine empowerment. Today you can compare and initiate change - no need to switch - Don't like Facebook privacy policies - rise up and get them changed - no need to switch. Have complaints about how a company treated you - ask how United feels about replacing guitars, or Whirlpool feels about mommy bloggers or Dell feels about their "Dell Hell" years. Corporate reactions to consumers have had to change in the last five years - it seems to me mostly for the better.

Now on to Gatorade's mission control - wow, what a GREAT image (and that's not just the geek in me). In so many ways it captures the romance of what I thought marketing was all about. I've been reading about "one to one marketing" since 1990! How technology and marketing were going to come together to finally deliver exactly what each customer wants - a marketer's dream right? - segments of one? Now finally powered by information technology and our own digital footprints through the web - the day has dawned? But has it?

I have to say, its a great vision - but the reality is very few companies can actually accomplish it. Why? First - historically most organizations have vast databases that are application specific, organizationally dispersed and difficult to aggregate - that leaves islands of information with some but often limited business intelligence insight. Second, most business people who use the data don't 'get' technology. They don't have a great understanding of how to get involved in the kinds of IT investments required to create the business value implied by "Mission Control". Oh, they want it, they just don't know how to get it efficiently or effectively. Finally, you are absolutely right - the web is liberating vast amounts of data for all the reasons you suggest. But most companies have a lot of interaction with customers 'offline' too. Where do you see this sort of sophistication - most online companies - amazon, google, expedia etc. Or with offline frims but only in regards to new ways they are using online marketing.

So where does that leave us? Empowered consumer? I say yes (mostly). Lab Rat too? (undoubtedly) - but I thought that was the point of marketing - a somewhat jaundiced view perhaps, but really as a consumer, shouldn't marketers be aiming to give me what they think I want - a unique segment of one?

Hmm, but what do I want. And that brings me to a larger point you are making that I totally agree with ... Is 'what I want' only reflected by what marketers and firms can see of my behavior online and the information I post? If they and their Man. Sci. brethren create alogrithms to cleverly deliver up to me 'what others like me' searched for, or bought - then what am I missing out on that I might be interested in? Where do my new interests come from? What might I find serendipitously if I were not pidgeonholed by my past surfing or by comparison to others? What results doesn't Google show me? What is hard for me to find on Amazon?

Now that is a true loss of power and control....

Niraj Dawar said...

Hi Nicole. Thanks for the thoughtful comment. I have to say, I like the convenience of online banking and book shopping at midnight as much as the next person. And technology does enable much of that convenience. But let's not confuse convenience with empowerment.
I can see how Dell Hell, United's guitars and other consumer online protests helped changed company behavior. But that is not empowerment either.
But these examples belie the everyday experience of consumers who face shoddy service, long wait times, and poor privacy protection.
The promise of one-to-one has never quite been realized either. A simple test of the success of one-to-one would be that junk mail would cease or at least be reduced -- why would marketers attempt mass mails if targeted marketing were available? Yet it hasn't worked that way. You get more junk mail than ever before.
The consumer does not seem more empowered -- just more burdened, analyzed, scrutinized, and milked. I think this is an opportunity -- marketers can do better. Those that use technology to reduce customers costs and risks, without encroaching on their privacy, can truly empower consumers.

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