Alan Mitchell: Organised consumers: ignore them at your peril
The customer may always be right, but we’ve lived in a seller’s market for too long. It’s time for consumers to beat business at its own game, says Alan Mitchell
Where would we be without words? We use words to communicate, to describe and understand the world around us. But sometimes the words we use become traps, channelling us down the same old pathways of thinking, closing our minds to immense opportunities.
Take the term “the consumer”. It’s an insult to human beings. A hangover from a fading industrial age. A consumer is a human being stripped of all human attributes except the one that producers care about: that human being’s role as a unit of demand for the stuff they’re trying to sell. “The consumer” is a dehumanising concept.
But marketing is built around this word. We use it a million times a day. Marketing is all about how to sell things to consumers: identifying which consumers we want to target, what message to use, how to send it, and so on. But what happens if we stop seeing people as consumers, and start seeing them as something else: as “believers”, or sellers, or investors?
Let’s focus on just one mind-shift: from the consumer as a unit of demand, to the consumer as a seller or investor of valuable assets. Which assets? Money, for a start. Sellers buy consumers’ money with their goods and services. Tesco’s market power stems from its ability to aggregate and organise this amazingly powerful asset. And this leads to a different philosophy of marketing.
The classic seller’s marketing philosophy is to “build a brand”. This enables the seller to charge more for what he is trying to sell, because people value it more. The philosophy as espoused by Tesco chief executive Terry Leahy is different. To him, it’s all about aggregating demand, which enables the company to bulk-buy, sourcing items at lower prices, which means it can sell more items at the same margin. The first route to profitability revolves around finding ways to increase the margin per unit sold. The second route revolves around increasing volumes.
Economists describe this difference easily, in terms of ways to tackle the same demand curve (the Tesco versus Levi Strauss saga is a set-piece confrontation between these two). But let’s use some marketing words differently instead. Just as companies such as Levi Strauss organise production and bring what they’ve produced to market to sell it, so Tesco does the same. Tesco is organising a consumer asset – “money” or “demand” – and bringing it to market, to sell it to producers who want to buy it with their goods and services. And the more efficiently and effectively Tesco organises this consumer asset, the more it prospers. It makes its money by organising the consumer.
Many other businesses make their money by organising consumer assets and selling them on the market. Most financial services institutions aggregate and organise consumers’ liquid assets into bank accounts, mortgages, pensions and so on. Media owners make their money by organising and deploying consumer attention, and selling it on to suppliers. Market researchers, list brokers and lifestyle database companies make their money by organising information from and about consumers, and selling that.
So what? How can using different words change the way we do marketing? Try these four thoughts for starters.
First, in each of the above cases, organising and selling consumers’ assets is merely a by-product of organisations’ core businesses. Tesco’s core business still revolves around sourcing, distributing and selling products, and it aggregates consumer buying power as a by-product of its success at this core business. Likewise, media owners’ core business is the manufacture and distribution of content, and they aggregate consumer attention to the extent that they do this successfully – as a by-product. In other words, nobody has yet made organising and selling consumer assets their core business.
Second, each of these players takes an extremely crude approach to organising consumer assets. No one, yet, has properly deployed the fruits of the information age – personalisation, customisation, plummeting transaction costs, interactivity and dialogue – to take it to a higher, richer level.
Third, each of these players organises one consumer asset separately: either it’s money or attention or information. No one, yet, has organised all three at the same time and capitalised on the obvious synergies. Just imagine the power of a retailer, a media owner, a market researcher and a banker all rolled into one! That’s the power of the organised consumer.
Finally, each of these players organise and profit from consumers’ assets without their explicit knowledge or permission. Nobody asks me if I want to watch a particular ad half way through Coronation Street. Tesco doesn’t ask me for permission to deploy the buying power I help to give it. So no one, yet, has organised and deployed these consumer assets on the market with consumers’ permission, doing it explicitly on their behalf. No one, yet, lets me invest my assets with them, to maximise the return. Instead, historically, I have handed over these assets simply in order to access what the retailer, media owner or banker is trying to sell.
So what happens if we bring these four points together? Quite simply, it’s what the information age means for marketing. With the industrial age, we leaped to a new level of efficient, organised supply. Marketing revolved around bringing the fruits of this supply (in the form of goods and services) to market, and realising their full value on behalf of the people who produced these fruits.
That will never go away. But now interactive information technologies such as the Internet mean we can raise the game to a new level of organised, efficient demand. We can organise those consumer assets of money, attention and information; bring them to market and realise their full value on behalf of the people who produced them – the so-called consumers.
That’s quite some change. And the sooner we develop new words to describe and communicate this new era in marketing the better.
Alan Mitchell’s book Right Side Up: Building Brands in the Age of the Organised Consumer is available from Harper Collins Publishers, at the special price of £16.99 (rrp £19.99) including postage and packaging. Telephone 0870 900 2050 and ask for department 832D