Balance of Power

An empowered consumer might trigger an equal, if not altogether opposite, reaction from marketers

Balance of Power

Anyone who knows anything about super powers knows that for some, say mutants like the X-Men, unique abilities manifest with age, often at the onset of puberty. I was a late bloomer, because my super powers didn't come to me until my mid-30s. But when they did, they were awesome, and gave me the ability to make tough men grovel, and to bend some of the world's biggest companies to my will. It took me a while to recognize my new abilities, and it wasn't until I saw Peter Sealey speak about his own transformation that I understood the power shift that had actually occurred. It was some time just before the turning of the new millennium, and Sealey, the one-time CMO of Coca-Cola Co., was speaking to a group of the world's most powerful advertisers and media companies, and shared something that left some feeling as if they had just been exposed to the marketing world's equivalent of kryptonite.

Sealey explained how he had just bought a new BMW over the Internet, and how the experience had shifted the power from the auto brand's manufacturer and dealers to its consumers, and how very soon, the same power shift would occur in virtually every product category, and extend to all goods and services. As Sealey explained the shift, it made my own Spidey senses tingle, because I had gone through the very same change. I had just bought a new car -- not a BMW, but a minivan -- over the Internet. Using Autobytel, I put in the specifications of the model I was looking for -- Ford Windstar, don't ask -- and within minutes, or as fast as my 1,400 bits-per-second dial-up modem could relay it, I had a bargain-basement deal. No haggling. No high-pressure upsell. Just a bottom-line price, including details about the factory cost and the dealer's markup. When I showed up at the dealer's lot on Long Island a couple of days later, I half-expected a last-minute pitch for undercoating, floor mats or some other non-essential, but was surprised by the efficiency of the transaction. I signed a couple of papers, handed over a check, received a set of keys and drove off the lot.

My super powers didn't stop there. Emboldened by my car-buying experience, I used them to buy my first house. My real estate agent, who was actually my father-in-law, would tell my wife and me about new market listings each Friday when he received his weekly printed copy of the multiple listings service (MLS) book that he and his colleagues depended on. The Connecticut town in which we were looking for a home was experiencing a tight seller's market, and many of the listings were already off the market by the time we learned about them. After hunting-and-pecking on the Internet, I came across a site that published the same MLS information online on Wednesdays that my father-in-law was getting in print two days later. His first reaction was surprise. Then denial. Then anger. But eventually, he started taking my lead, setting up appointments for new homes on the market, one of which we actually bought.

I didn't know it at the time, but what Pete Sealey and I were going through was part of a progression of power shifts that have been taking place ever since the rise of the era of mass marketing that began after World War II. Back then, all the power lay with the big manufacturers, who used the super efficient new mass-selling medium of television to dominate the marketplace. But their real power, says Sealey, now a consultant, and an adjunct professor of marketing at the Drucker School of Management, was knowledge.

"Real power comes from knowledge, and the people who control it," he explains. "The companies that had the knowledge when the power of information processing was in mainframe computers were the big manufacturers who could tell the retailer what they were selling, and tell the consumer what they were buying. But if you follow the migration of the computer, as it got smaller and more powerful, it made its way into stores and at the checkout, and suddenly the retailers had the power to tell the manufacturers what people were buying."

That shift, which began in the 1970s and ran through the 1980s, saw the greatest share change ever in the history of marketing budgets: Advertising's share of marketing budgets plummeted to 25 percent from 50 percent, while promotional spending -- mainly price discounts to retailers -- grew to 50 percent from 25 percent. Mass marketers had lost power to mass retailers, because computer processing shifted knowledge from marketers to retailers.

Sealey calls his knowledge power epiphany a "thesis," but so far it is proving out. But it could also be called Sealey's Law, though it incorporates elements of Moore's Law (the principle that computer processing power would double every year) and Gilder's Law (that bandwidth would double or triple every year), with the implications that knowledge exchange has on the consumer marketplace.

The biggest, and perhaps most sustainable of these shifts, began occurring as computer processing and bandwidth got affordable enough for consumers to seize control of knowledge. This began to take off about the time Sealey and I were buying our cars online in the late 1990s, but has accelerated every year since, and some experts believe there may be no going back, as new manifestations of information-sharing, especially social and mobile media, begin to have multiplier effects.

"When we talk about the 'superconsumer,' we usually think of all these forces converging to give them 24/7 connectivity and information at their fingertips," says Rita Wheat, group director of emerging shopper & marketing technologies at WPP's G2. "Fifteen years ago I'd go to a car dealer, and -- especially as a woman -- I'd be in their hands. It was frightening experience. Now it is a completely different experience: The consumer is in control and can make demands. I can walk into a store and use an app on my phone to scan a product, and instantly, I know as much, if not more, about it than the people in the store. That's the superconsumer."

While mobile has profound implications for bringing the power of knowledge and connectivity into the store, Wheat says the real game-changer is social media, because it brings what historically has been the most influential factor in many consumer purchasing decisions -- the opinions of friends, family, colleagues and professionals -- to their fingertips as well.

"The progression used to be somewhat linear," Wheat notes, adding, "but now it has exploded into all these nonlinear ways because of access to digital media, and it is all being vetted by your peers." While the effects of this digital consumer knowledge exchange may be most evident online, experts on shopper marketing believe the biggest changes are poised to impact the in-store experience. Wheat's example of handheld scanner apps are merely the tip of the iceberg, as new technologies give consumers increasing amounts of access and interactivity with information. Wheat foresees a time in the not-too-distant future where the science fiction of Philip K. Dick becomes reality, and store signs, shelves, and products on display recognize consumers and try to engage them based on who they are, what they want, or data on what they've wanted in the past.

Rudimentary technologies such as RFID (radio frequency identification tags), 2-D codes, and satellite-based geotargeting have already been deployed, but the big breakthrough, Wheat says, will be "facial recognition" technologies that will literally enable stores to know who you are, what aisle you are walking down, what products you are looking at, and what expressions you have on your face while you are doing all of that.

Add yet other digital layers to that in-store experience, including instant access to your online social network profiles, and what your friends may also be thinking about those products, and the lines separating online ecommerce and brick-and-mortar retail commerce begin to blur. Want to get even blurrier? Wheat suggests you consider the ramifications of augmented-reality technologies that can literally customize the reality of the in-store experience to your personal shopping preferences, highlighting products and features you've expressed a known interest in, or offering you deals based on past or potential purchases.

Most of those augmented-reality applications currently utilize mobile phone screens as a medium, but over time, more refined iterations are expected to alter what you see on in-store screens, on shelves, packaging, and possibly, even your own natural vision -- via glasses, contact lenses, or projections. Wheat says the roots of these technologies are already in place, and that if you follow what's been happening online -- especially the recent deal between online retailer Amazon and social network Facebook -- your friends and family may soon be influencing you in the grocery aisle. Based on that deal, Amazon customers will also get to see what their Facebook friends bought on the online retail site. The next phase, says Wheat, will be "going into a store with an augmented-reality tool and seeing the store filtered by your peers, including their user ratings and personal criteria."

As brave a new world as that may seem, some shopper marketing experts think it may be a little too utopian, or possibly, a little too "creepy" and intrusive for some consumers and regulators to stomach. "Just because we can do that, doesn't mean we should," says John Ross, the head of ShelfLife, Interpublic's new shopper science division, an agency that was conceived by Ross to develop more sophisticated tools to understand what consumers want, and to help marketers and retailers fulfill them.

Ross calls the vision of an all-knowing augmented-reality shopping experience "dark and scary," but that doesn't mean that marketers cannot employ similar technologies and techniques in a way that creates a positive and more satisfying experience for consumers and markets alike. In fact, Interpublic is beginning to use facial recognition technology, too. But instead of using it to tell stores and brands who their customers are, it is using it to inform them how shoppers might be feeling about the experience they are having in the store, online, or anywhere else they are making a decision to buy a product or service brand. Using a technology developed by MIT's Media Lab to help autistic children understand human emotions based on facial patterns, Interpublic is now able to passively, and anonymously, determine what emotions consumers are feeling when looking at a retail environment, or a brand or product in it, including its packaging.

It's just one of the tools Ross has developed over the past couple of years to help Interpublic clients understand what influences where, when and why people buy their products. Ross, who was CMO of home improvement retailer Home Depot before joining Interpublic, spent more than a year running the agency holding company's Emerging Media Lab, where he got firsthand exposure to some of the most promising new media technologies, and how people interact with them.

But his biggest epiphany, and the one that is at the core of Interpublic's shopper science division, comes not from Silicon Valley, but from inside the Washington Beltway -- the research political scientists use to understand how undecided voters choose which candidate to vote for. "How voters go from undecided to decided on Election Day is fundamentally the same process a consumer goes through when deciding what bank or restaurant or store to go to," explains Ross. "It's basically a decision-making process based on influence."

Armed with that knowledge, Ross has built shopper science around developing tools and processes to understand what factors have the greatest influence on a consumer's purchasing decision, and when and where they happen. Ross likens the process to media planning, or even its algorithmic counterpart on a computer, "media optimization," but he says it is far more multidimensional and deals with the entire ecosystem that could influence a consumer's purchase decision -- from friends and family to media to retail environments and ultimately a brand's package design.

To show how it works, Ross gives the example of a specific packaged goods product -- a cake mix -- and tells how Interpublic's analysis helped it understand what were the most influential factors determining why someone buys it, and how advertising, media, retail and packaging could be modified to make the most of it. Ordinarily, cake-mix marketers focus on selling points like taste, moistness, convenience and price, but Ross says Interpublic's shopper analysis revealed a surprising epiphany about some key influences driving purchases of the products. As it turns out, many consumers see cake-making less as a cooking experience, and more a part of an important event -- usually a party -- and consequently want a brand that will assure them that the cake will deliver what they expected. In other words, they want a cake-mix brand that provides confidence, and information and instructions on how to prepare it. Typical research on the product-purchasing cycle of cake mixes might indicate that the decision process is fairly near-term, but Ross says Interpublic's research found it could actually start weeks, or even months ahead of time, and might start as part of a party-planning process. Consequently, channels such as social media, in which users look for tips and recommendations on party cakes, could actually be more influential than TV, magazines, or even in-store media and packaging.

Ross says the research has revolutionized the way Interpublic and its clients think about consumer purchasing in general, and that they have long rejected such industry rules of thumb like the statistic that upwards of 70 percent of product purchase decisions are made in the store. The reality, he says, is that the decision process is part of a much longer and convoluted cycle that may have little or nothing to do with what marketers and retailers are doing in the store.

Interpublic's goal, he says, is to take that knowledge and find ways of enhancing how a brand's media works along the entire cycle, including in-store. To do that, the agency utilizes sophisticated heat-mapping techniques that pinpoint the key areas that influence a consumer's decision. Interpublic calls these maps a "neural shopping matrix," but it does not literally map consumers' brains, a science that has grown popular on Madison Avenue lately, but which Ross eschews. Interpublic uses the term "neural," because the maps look like brain wave activity.

As much as agencies and marketers are beginning to understand about superconsumers, and what motivates them, the technology and behavior are evolving so rapidly that they may need to race to keep up. One recent development that has had a powerful influence on consumer purchasing patterns are online social shopping platforms like Groupon, which informs consumers about the best deals at retailers in their area.

"Basically, technology is enabling consumers to form collective bargaining groups, and take hold of the pricing gun, and the terms of conditions of shopping that have always been imposed on them," says Antony Lee, founder-CEO of WeShop, which he describes as a social network that enables consumers to "utilize their own anonymized shopping data to lead retailers and brands to make them great offers." Collective bargaining power is just the start, says Lee. The real change in consumer bargaining power, he says, will come from consumers "sharing wisdom" about products, brands and the deals they can get from them. "Collective wisdom hasn't really happened yet, but it will," he says, predicting that it will be the next big game-changer. He likens the current generation of deal engines and networks to the yield management systems developed by the airline industry that power the offers made by travel and airline sites. Consumers get to see what seats are available and what their bottom-line prices are. What they don't get to see, is what other people got to pay. And that, he says, is what will happen next as consumers begin to share their personal deals data with one another.

It's already beginning to happen in some consumer products and services sectors., a financial information-sharing site that was acquired by Intuit last year, does that for financial services, collecting information on individuals' financial deals and sharing them anonymously with the rest of the community.

If all this sounds like marketers and retailers are completely losing control of the process, there is a flip-side to super-powered consumers that is actually empowering marketers, albeit to serve consumers better.

The obvious result, says WeShop's Lee, is that brands will be able to capture and model information on the deals that appeal most to consumers. And as Interpublic's Ross suggests, the data doesn't simply have to be about price, but can be about other important factors that influence consumer decision-making. The reality, say most shopper marketing gurus, is that for all the information consumers are getting, they are also giving up a corresponding amount of data that, if used wisely, could create some balance of power in the marketplace.

"The next game-changer could be the fact that some information-centric companies -- primarily Google and Facebook -- are also gaining incredible power," says Sealey, who became a member of Facebook's first board in 2005. "Theoretically, they know what kind of car you drive, what your cell phone usage is. If you've crossed over a bridge, a transponder will report it. If they put it all together, they can know where you are and what you are doing."

Or as the movie version of Spider-Man alter ego Peter Parker's Uncle Ben once said, "With great power, comes great responsibility."

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