When the consumer is not king

When the consumer is not King

Information overload has moved the decision- making power away from the

consumer to a new set of market players — the influencers

( article also published in The Strategist - Business Standard, 16th Feb 2015

http://www.business-standard.com/article/management/when-the-consumer-is-not-king-115021500650_1.html )

Information  overload  has  moved  the  decision-  making  power  away  from  the consumer to a new set of market players — the influencers In the latter half of last century, the rising competition among suppliers tilted the bargaining power  in  favour  of  the  buyer.  Competition  intensified,  so  much  so  that  the  purchase decisions  of  the  customer  started  deciding  the  fate  of  suppliers.  This resulted in  the  oft  repeated marketing jargon, ‘ the customer is the king’.

The power of the customer was further expected to multiply manifolds with globalisation.

Instead, abundance  of information, coupled with large number of options, did not enhance  the  power  enjoyed  by  the  customer  and  reduced  the  power  of  the  supplier.  This power moved to a new class of market players — the influencers.

Enter  the  influencer.

The  ever  expanding  consumption  basket  of  the  consumer  and  the  abundance  of  options  and  associated  information  have  put  an  intense  pressure  on consumer’s decision- making capability.

The consumer is increasingly using inputs from third parties, consultants, search engines, her  personal  trustees  etc.  By  sifting  through  the  surfeit  of  information  and  the  maze  of options, these third parties help her in decision- making.

Influencers  have  become,  in  one  sense,  the  ‘BPO  for  decision  making’.  Influencer’s  role, therefore,  can  significantly  impact  the  fate  of  suppliers,  thus,  leading  to  shift  in  relative power to the influencer.

More  and  more  marketplaces  are  experiencing  the  phenomenon  of  larger  portion  of decision making moving out of consumer’s domain. For instance, it is the interior designer, who decides what materials/ products will be used even though the consumer is spending the money. It  is,  therefore,  the  designer  who  determines  the  fate  of  the  suppliers  of  furniture, kitchenware,  wallpaper,  lightings  etc,  thus  occupying  the  most  enviable  position  in  the power structure within that marketplace.

Similar is the case of film critics. Their decision impacts the first weekend collections, giving them huge power at the box- office.

There  are  also  cases  when  consumer  is  statutory  prohibited  from  making  decisions.  For example, regulation mandates doctor’s recommendation for sale of medicine or for settling insurance bills.  Rising  competition  among  pharmaceutical  companies  and  hospitals  has reduced  their  own  bargaining  power  but  not  empowered  the  consumer.  The incremental power is enjoyed solely by doctor — the influencer.

Social networking sites provide a platform for consumers to exchange their opinions. Using this  information,  technology  identifies  what  is  trending  and  also  influences  subsequent trends.  The  former  helps  these  sites  understand  consumer’s  mind  and  the  latter  makes them a large  scale influencer. However, the biggest beneficiary of the information explosion is  Google  —  it  plays  a  key  role  in  deciding  which  website  a  browser  hits  first,  the advertisement he sees and so on. This coupled with its trans- geographic presence makes it a supernatural power.

It is interesting to note that the organization backed influencers have acquired power in the same systemic manner. The five- staged approach of organisation- backed influencers are:

stage  1:  positioning;  stage  2:  customer  goodwill  (offering  free  service);  stage  3: addiction  (influencer  starts  occupying  the  space  around  consumer’s  decision making neuron ( DMN); stage 4: monetisation ( access to consumer’s DMN empowers influencer to impact the fate of suppliers); stage 5: sustenance.  The stages one to three experience high mortality rates ( for example,  Orkut). However, the monetisation options after occupying the space around consumer’s  DMN are so lucrative that even non-  influencers occupying that space (without going through stages 1-  2) find it difficult  to  resist  monetisation.  For  example,  success  in  their  fields  makes  celebrities  role models for consumers.

Therefore, marketers sense opportunity in engaging celebrities to influencer consumers.

As a result, celebrity endorsement has become a huge business vertical.

The  vulnerable  consumer 

With  many  potential  influencers  attempting  to  temper  with consumer’s DMN, it is impossible for consumers not to be swayed. Therefore, consumer’s decision- making is no more like that of asking who decides in solitude. The buck doesn’t stop at her.  The power of  organisation-  backed  influencers  (search  engines,  social networking  sites)  is  much  more  than  that  of  individual  influencers  (interior  designer,  film critic etc.). A classic case is that of the Indian media sector that has enjoyed an exceptional rise in power as an influencer in the last few years. It is no co- incidence that this sector’s influencer too has religiously followed the above mentioned five- stage path.

Thus,  from  determining  the  fate  of  suppliers  to  deciding  the  very  destiny  of  nation,  the influencer’s power gets insurmountable proportions when it morphs from an organisation to a sector. No wonder, global credit rating agencies can make a nation bankrupt.

Where does this lead to?  

The influencer’s power has raised many ethical, academic and regulatory issues. With the influencer’s power expected to rise, should it be regulated? If yes,  then  can  the  consumer  who  receives  information  without  any  consideration  and probably  even  without  any  legal  contract,  have  any  legal  claim.  An agreement without consideration is void.  If no, then  the  influencer  is  enjoying  power  without  responsibility.

Should this be allowed? For consumers and the marketers, the presence of an influencer raises new challenges. 

Whether  she  likes  it  or  not,  the  consumer  will  now  have  to  live  with  influencer.  The consumer will need to ensure that influencer is more loyal to her than the marketer. This can be done through: Disincentivising bias: Marketer would work towards a reward system for the influencer; consumer could work on the polar opposite. A ‘dislike’ button for influencers could become influencer’s barrier in losing consumers’ confidence.

Transparency from influencers: A case in point is  www.whosmydoctor.com.   It is a website wherein doctors can subscribe and provide all their details including sources of income from pharmacy companies. If patients/ hospitals can make it mandatory for doctors to subscribe, doctors will have to disclose their biases.

Fee- based influencers: Fee could bind the influencer within moral and legal framework. It would also lower influencer’s propensity in leaning towards the marketer.

Though  full  backing  from  influencers  may  not  ensure  success  for  marketers  but antagonising influencers is surely a recipe for failure. The influencer’s presence being a fait accompli will mean influencer management a must activity for many marketers.

In  traditional  economics,  seller  sells  goods  and  receives  money  from  buyer.  However, influencer sells goods (i. e. information) to person A and receives money for the same from person B.  By  questioning  the  definition  of  ‘  buyer’  and  ‘  seller’,  the  influencing  business challenges the basic tenets that have all along been axiomatic. We are, hence, not far from the  day  when  the  theory  of  microeconomics  at  large  (  and  therefore  that  of  business strategy) undergoes a rewriting of sorts, to accommodate the role and power of this new king on the block — the influencer.