Last week’s cover story on Cott underlined one of the profound changes affecting marketing over the past few decades: the rising power of the distribution channel. Retailers’ ability to control prices, to play one supplier off against another and to gather priceless information from each transaction, has helped them gain an edge over manufacturers in the contest for “ownership” of the customer. Organisations such as Cott are helping to accelerate this trend by applying and adapting traditional manufacturer marketing techniques to the development of retailer brands.
But will the process end there? Or is it just a transitional stage on the way to a more complex and challenging future? Just as the rise of retailer power sent shockwaves through traditional marketing strategies and industry structures, so could the next big development: the rise of genuine consumer power.
Of course, we all know that consumers are king. But so far they operated a peculiar kind of dominion. They’ve been able to exercise choice – enough to make or break company fortunes. But that choice has been very limited, and highly influenced by external forces.
In the post-war economy it was a sellers’, not a buyers’
market. Consumers were happy to buy the benefits they were offered, and were without the knowledge or experience to ask too many awkward questions about how valid marketers’ claims were, how good for them their purchases would be, or whether they represented real value for money. If consumers ruled, their rule was ineffectual, their decisions subject to a coterie of hangers-on, flatterers, “advisers”, place seekers – all of them hoping to use the sovereign’s favours to their own end.
Now consumers are truly beginning to assert their power. Four factors are combining to drive this shift. First, the unprecedented rise of consumer affluence. For the first time in history, markets are becoming saturated. The three-television and two-car family needs a lot of persuading to buy another of either. Marketers may have been ingenious in their attempts to surmount the pressures created by over-capacity, but in category after category it has become the driving dynamic. A seller’s market has flipped over into a buyer’s market.
Second is the much-discussed rise of the marketing-literate purchaser. Forty years after TV advertising began, marketers are continually astonished by
consumers’ ability to “see through” their strategies. If knowledge and understanding is power, this marks a decisive shift in the balance of advantage.
Third, the burgeoning media revolution is transforming the nature of marketing communications. Interactive multimedia may be a while away yet, but it is placing reader or viewer in the position of editor, as opposed to a mere receiver. Changing monologue to dialogue is only the beginning. Increasingly, the decision to start a conversation in the first place will rest with the consumer. Marketers will further penetrate homes (and minds) by invitation only.
Fourth is the rise of the information economy. In the first flush, this gives marketers new power. The database opens all manner of opportunities for analysing and understanding consumer needs and behaviour – for targeting, for one-to-one relationship building and so on.
But if chief executive of the Direct Marketing Association Colin Lloyd is right, organisations which yield market clout through their command of databases and information technology may soon find it slipping through their fingers.
According to Lloyd, in the Fifties and Sixties, governments had data and they had power. This was the age of the CIA and the KGB. In the Sixties and Seventies, companies embraced the computer and new market-research techniques – and power began to shift from those in government to those running the corporations. At the back end of the Eighties, that shift continued with the rise of the retailer.
In the Nineties and onwards “there’s only one place to go – the individual”, Lloyd argues. Everything points to consumers having more information at their fingertips and having more control over the data they hand out to third parties. Indeed, in future, he suggests, “individuals will become the custodians of their own database and interested parties will have to solicit it. The individual will control the gateway to the use of data.”
However, the consumer’s rise to power is faltering and partial. It’s limited to the rich half of the industrialised world and elements such as new media have yet to take effect. But the recent humbling of a mighty corporation like Shell at the hands of pressure groups, notably Greenpeace, gives a hint of its potential force.
Consumer power could mean many things. It may imply a subtle shift in the relationship between brands and their buyers. The trust one places in a figure of authority is significantly different to the trust one places in a partner – or a servant. Brands are ceasing to be a guarantee of extra margins and becoming the ticket to enter the marketing game: if you fail to build an all-round brand, you fail to figure.
Likewise, the rise of consumer power will open new dimensions of choice. The mere choice between brand A and brand B can soon seem like a shackle. What consumers are looking for is the ability to package or unbundle a range of product attributes and services at will; to choose when to purchase and from whom, using the payment mechanism that suits them; to choose when it’s delivered and how, through which channel.
If the paradigm for the consumer as puppet king was the out-of-town shopping centre, the paradigm for the future is home-delivery pizza: something that may require a complete reconfiguration of the supply chain, distribution channels and cost structures, new strategic alliances, and new channels and types of communication.
Many of those vying for consumers’ attentions may find themselves out of a job. But when the consumer really ascends the marketing throne, the rewards for those who have gained the sovereign’s favour may be great indeed.