Are you investing a lot of time, effort and attention trying to phantom the marketing implications of the boom in user-generated content and social networking websites? If so, here’s a suggestion. Unless your brand is in a highly relevant category such as entertainment or media, create a special filter which blocks all mention of these terms and switch off for a couple of years.
The danger of the current brouhaha is not that it’s all very fascinating (which it is), but that the more we are mesmerised by it, the less we notice the ground shifting beneath us. Today’s Web 2.0 hype is misleading for two reasons. First, it’s only the tip of a much larger and more important phenomenon. Second, it misconstrues the real nature of this phenomenon. As far as most marketers are concerned, the real issue is changing “media”, “entertainment”, “communication channels” or even objects of consumer attention. The reality is that these changes are symptoms of the economics of personal decision-making, a revolution as profound as the one triggered by Henry Ford and mass production.
Under craft production, to make a second item, craftsmen simply had to repeat the same steps as for the first item: the cost of making two things was about twice as much as the cost of making one. Under mass production, you invest a large amount of money upfront in plant and machinery and you use this plant and machinery to produce hundreds of items – in the time the craftsman could make only one. Your unit costs are therefore (say) just 1% of the craftsman’s. And suddenly things that were previously unaffordable to the masses (such as motor cars) become affordable and the market for them booms.
Until very recently, consumers researched the market for products and services as “craftsmen”. If Mrs Smith in Skegness wanted to research the market for, say, digital cameras she would enter a long and laborious process of information gathering, visiting shops, reading newspaper and magazine articles, talking to friends, etc. In fact, this process was often so long and laborious that she gave up half way through and opted for whatever was easiest. And if Mr Jones of Scunthorpe also wanted to research this market, he had to start all over again. So the cost of two people researching the market was effectively twice that of one person.
Now however, price comparison, product comparison and other information-sharing services are creating information assets that hundreds of people can use many times over. So the unit costs of accessing and using this information are plummeting to, say, 1% of what they were before. And suddenly, something that was previously unaffordable to the masses – access to comprehensive buyer-centric information designed to help people make better decisions at a lower cost – is becoming affordable. So the market for this information is booming. Just like the advent of mass production.
A hundred years ago, mass production was the epicentre of an economic revolution that spread into every nook and cranny of economic life. Today, the same is happening, except this time the new revolution revolves around the economics of information access and use: personal decision making.
What does this mean for marketers? Most products and services make their money from their own unique configuration of five I’s (chosen for the sake of alliteration). The first I is Incommensurate qualities. The product or service is unique, special or superior in a way which matters so much to the consumer that no other product or service even enters the equation. This is the brand manager’s dream (though it’s usually more of a dream than a reality).
The second I is Inclusion in the consumer’s consideration set: “good enough” quality, price, functionality to be a part of the customer’s purchasing repertoire. Not as spectacular as being Incommensurate, but still a pretty good foundation for a business.
The third I is Insurance. Many consumers will choose a brand they know because it represents less of a risk than one they don’t know. Here, we begin to move from product attributes to consumer attributes – their decision making processes.
The fourth I is Inertia. This can take many forms. Often, it’s mere habit. Often, the sheer cost and tedium of researching the market and making a new decision is so high that we don’t bother. Often, the administrative hassle of closing an old account and opening a new one makes us think twice about doing it.
The fifth I is Ignorance. The consumer simply doesn’t know enough about the product or category to ask the questions he needs to navigate to best value. So, for example, he doesn’t know enough about commission fees and administration charges to understand the huge difference in value between “tracker” styles of investment as opposed to managed funds.
The most immediate and palpable effects of today’s embryonic personal decision-making revolution are on the cost/ benefit trade-offs of consumer ignorance, inertia and/ or insurance, especially in categories such as financial services, holidays, travel, hi-tech and motor; as distinct from, say, soft drinks, snacks, fashion or entertainment.
For companies where these three I’s form important sources of revenue (e.g. financial services) the personal decision-making revolution looms as an unwelcome threat. But for most brands it is an opportunity. The counterpart of ignorance for example is education. There are untold opportunities for new brand strategies built around new roles as trusted, sought-after sources of expert information. Price comparison sites may be able to compare prices, but producers will always know more about the ins and outs of production, ingredients and use than any information aggregator.
The counterpoint to inertia is true relationship marketing as originally espoused by Don Peppers and Martha Rogers so many years ago. Not technology-turbocharged spamming under the guise of customer relationship management, but using information generated by the two parties’ interactions to continuously improve the mutual value of the relationship. Done properly this can transform Inertia into Incommensurate value.
Finally, the counterpoint to ignorance is earning independent third party plaudits, by excelling on that first I of incommensurate value.
Brands as information services, real relationship marketing, embracing the value of independent third party sources of information. None of these will be easy to master. None of them can be achieved overnight. They each involve a steep and perhaps painful learning curve. They change the marketing mix, and require new skills. But they are defining new arenas of brand competition. And they simply reinforce the essence of good marketing: “deliver superior value”. Yes, the world is changing fast. But underneath the turmoil, the basics still apply.
Alan Mitchell, www.alanmitchell.biz