The Rise and Rise of the Consumer

click to view

The 'knowledgeable' customer

Scholarly Article

Widespread Internet connectivity means society has access to the same informational resources which organisations hold valuable. This mainstream access to value-creating resources radically alters the role of the consumer (or customer) to something very different to that of traditional positions. Consumers are gaining empowerment from the acquisition and usage of such information, to the point where they possess much of the same understanding about a topic as the organisations they seek services from. Whether it be browsing online portals for information about the latest LCD televisions, or downloading Google Earth to gain a birds' eye view of their next holiday destination, the power is shifting into their hands.

Never is this more vivid than in the Australian property market, where consumers have access to a plethora of information including property portals, historical statistics, multimedia, land parcel data etc. Societal access to this information is changing the role of the real estate agent from information provider to consultant, with trends pointing toward an open fee-for-service (Afuah & Tucci, 2001). Such irreversible changes to the dynamics of consumer interaction mean organisations are now confronted with a disaggregation of conventional value propositions and the arrival of the 'knowledgeable' customer (Moore, 1993, Tapscott, 1999).

The 'knowledgeable' customer no longer views the company reprepentative as the source of truth, but as a consultant, able to offer options and discuss strategies, rather than dictate actions. Indeed, to attempt to 'sell' to information-savvy consumers, rarely results in success. Ultimately, in today's networked society, the consumer does not just represent the end of the value chain, but is a partner and active participant in the creation of new value.

The intelligence 'on-the-ground'

In rethinking the role played by their customers, organisations are slowly beginning to realise the importance of treating them as a source of market intelligence and knowledge and not just as entities which consume products and services (Amidon, 1999, Stapleton, 2003). Increasingly, information which was once communicated to consumers via monologue, is becoming an openly exchanged dialogue. If done cleverly, this approach greatly assists not only in understanding the customer's current wants and needs, but in untapping hidden opportunity and even innovation (new product and service offerings). Indeed, consumers are fundamental to the innovation process itself and should always be the focal point of organisational innovative ability (Amidon, 1999). As Quinn (1999, pg. 127) suggests:

Interact and innovate - winning both races at the same time

Consequently, with consumers becoming a more influential part of the innovation landscape, organisations need to better interact and build stronger relationships with them (Vandenbosch & Dawar, 2004). However, within a digital era where consumers are frequently bombarded with misdirected marketing assaults, their full and willing engagement is not easy to acquire. The new mission of modern business is then to build permission-based channels for customers to openly interact and connect through dialogue.

It is becoming apparent that the organisations which are better able to achieve consumer/customer participation are more likely to deliver improved levels of service which will meet significant market demand. In engaging the 'on the ground' market and placing an importance on genuine customer-focused attention, organisations are investing in real business development rather than innovation for innovation's sake (Barwise & Meehan, 2004). The hidden benefit in engaging consumers as active participants, is the loyalty and trust it brings. Participation offers tremendous relationship building potential as consumers who are able to openly communicate, perceive themselves as having input into a process whose outcomes will satisfy their real wants and needs.

A trend to appear over recent years has been that of recommendation and reputation-based systems. Capitalising on users motivated by feelings of anticipated reciprocity, improved reputation, efficacy and community (Kollock 1999; Rheingold 2000), the overall value proposition of such sites is ever-strengthened by the participation of their members. A noteworthy part of the achievements of these online businesses (e.g. Amazon, Epinions, Ebay etc.) is attributable to their members' direct and active contributions. In examining why, we find that the resultant collation of such experiences (e.g. feedback, reviews, testimonials etc.), if positive, represents a seemingly reliable endorsement of the products, services and/or agent's being promoted via them (Despotovic and Aberer 2006). Indeed, in a world now overloaded with information and choice, measuring and storing the quality of interactions is equally, if not even more important than measuring the links themselves (Scott 2005). Such an aggregated "quality of information", becomes an instrument for reducing uncertainty (complexity) and in doing so greatly impacts participant's decisions by saving time and reducing perceived risk (Masum and Zhang 2004; Ziegler and Lausen 2005).

Such reputation-based systems are but one facet of the architecture of participation which underpins many Web2.0 technologies. Instilling a sense of truth and validity in the information contained within, the socially inclusive and "on the ground" nature of these technologies is cutting against the grain of mainstream broadcast media business models, granting weight to the collective intelligence of the crowd (O'Reilly 2005). For example, viral marketing or influential manufacturer-endorsed bloggers have readily been deployed to spread positive word of mouth in preference over traditional media (Subramani and Rajagopalan 2003; Fadaghi 2006). Sensing this shift toward a 'socialisation' of experience, the world's largest media and advertising companies have jumped head-on into the online interactive market. The permission-based nature of most Web2.0 mediums facilitates highly tuned and targeted advertising, as demonstrated by the recent agreement between Fox Interactive Media (which includes web property MySpace) and Google (NewsCorp 2006). As user's actively and willingly participate, a clear profile of their interests and desires can be acquired, establishing not only direct passage for more personalised syndicated advertising, but a source of tremendously valuable market intelligence.

Epitomised by businesses like Google, Ebay and Amazon, Web2.0 systems are inherently adaptive and learning systems. They relentlessly scan their environments for indications (patterns) which may signal trends and follow-on to exploit emerging markets. In adjusting their structure to continuously secure new opportunities, such adaptive organisational systems often also evolve their business models and modes of operation. They embrace the chaos of business development by adopting a systemic policy of learning and knowledge acquisition, delivered upon a supporting infrastructure imparting necessary direction and control. In these cases, the architecture of participation delivers a continuous stream of permission-based market research, whilst at the same time reinforcing their position. Indeed, Web2.0 has the potential to allow for the simultaneous generation of revenue whilst performing research; the creation of organic, innovation and money-making machines.

About the author

Keywords

Networked economy, knowledgeable customer, social intelligence, permission-based channels, interaction, customer relationships, participation, innovation.

References

Afuah, A. & Tucci, C. L. (2001) Internet Business Models and Strategies: Test and Cases, Singapore, McGraw-Hill Irwin.

Amidon, D. (1999) Customer Knowledge is NOT Knowledge of the Customer. Entovation international. Accessed May 22, 2006 from http://www.entovation.com/gkp/customer.htm.

Barwise, P. & Meehan, S. (2004) The benefits of getting the basics right. ft.com (The Financial Times Ltd.). London.

Moore, J. F. (1993) Predators and prey: A new ecology of competition. Harvard Business Review, vol. 71, iss. 3, pg. 75.

Quinn, J. B. (1999) Maximizing Innovation Using Intellect, Science and Technology. IN Holtshouse, R. R. D. (Ed.) The Knowledge Advantage: 14 Visionaries Define Marketplace Success in the New Economy. Capstone Publishing Limited.

Stapleton, J. J. (2003) Executive's Guide to Knowledge Management: The Last Competitive Advantage, New Jersey, John Wiley & Sons, Inc.

Tapscott, D. (1999) Creating Value in the Network Economy, Boston, Harvard Business School Publishing.

Vandenbosch, M. & Dawar, N. (2004) Deriving value from customer relations. ft.com (The Financial Times Ltd.). London.