Another Thread on the Bursting Media Bubble

by Chris Kenton on September 25, 2009

Another post in reply to Venkat, and his comment on this thread.

Let’s start breaking this down a little to see if we can find the core.

1. Marketing is all about facilitating an exchange of value. If I can convince you of the value of my offering, we’ll make an exchange.

2. The “convincing” part of marketing can take all manner of forms, from soft requests and artful commercials to hard requests and even expertly constructed situations (economic, social, physical ) where you have, or perceive yourself to have, little alternative but to engage in exchange. (e.g. I need a smoke; I need a memory card compatible with this device.)

3. Each party in an exchange of value, at least in most cultures, is motivated to seek an advantage. I want you to pay more, you want to pay less, and there are many opportunities on both sides to try and game the exchange.

4. Our economy system is hardwired from top to bottom to drive growth. We could have a separate argument over whether this is a fundamental human drive, but clearly the economic drive is wired into our system at the most fundamental levels.

Okay. So, why did I choose those points to make? If you go back to earlier days of history–let’s take medieval England for example–the means of production for any product you were likely to buy, were very close to the marketplace where they were bought and sold. Supply was generally limited. Anyone who was selling in the marketplace was overwhelmingly likely to be known by reputation to the community. You had far fewer alternatives for what you could buy, but you knew pretty well going into the exchange what the playing field was.

As technology enabled producers to create ~more~, it also enabled them to create the means to transport to new markets, or gain new raw materials–for example, the ships that allowed English traders to connect with Dutch markets. The further the market from the production source, the less likely consumers were to know the reputation of the manufacturer. So brands became increasingly important proxies for reputation. And as the remote markets became larger, the need grew to create technology to be a proxy for putting up your stall and shouting your wares. First it was printing that allowed you to push your ad into the hands of people you might never meet, then increasingly efficient mechanisms to reach more and more people.

What I’m interested in is how the relationship between businesses and buyers changed with this growth, how it was enabled by technology, and how it impacts the social fabric of day to day life.

My thesis is that the relationship between businesses and buyers is fundamental, and goes back to the earliest days of social life on earth, accelerating with the division of labor. I have something you need, and vice versa. It’s a fundamental social contract at the very core of human life. But the further technology took us in pursuit of growth, the more imbalanced the contract became, due only, I expect, to the inherent expense of technology–especially in its early phases. Since only businesses, governments, institutions could afford the cost of production, advertising, transportation, they had a massively asymmetrical advantage over consumers. Since, as stated above, there’s an inherent motive to maximize the exchange in your own favor, and an equally inherent motive to grow, businesses have used that advantage (better than governments and institutions) to progressively create the machinery to make the exchange of value ever more efficient–turning consumers effectively into a fungible commodity. To put it bluntly, consumers have become little more than disposable batteries for business. And if you spend enough time in the machinery of modern corporate marketing, you can appreciate how masterfully this machinery can work. In its best incarnations, there is real value and joy on the part of the consumer (Apple products, for example), but make no mistake that the machinery is tuned to maximize the efficiency of converting customers into cash. I’m not putting moral judgment on it, I’m simply saying that’s what we’ve created.

The next part of my thesis is that social media is little more than a signifier that something in this equation has fundamentally changed. Social media is not the cause, it’s the reflection of a cause far deeper than most people realize. And there’s an interesting irony at the heart of it. Because of business’s fundamental drive to grow, they’ve sought and developed new markets for some of the very technology that lent them so much power. They’ve increasingly made computers, communications, production and transportation technology cheaper, more powerful, easier to use for ordinary consumers–not out of the goodness of their hearts, but because there were huge profits to be made doing so. But as soon as consumers got the means of connecting and communicating on a massive scale, the inherent advantage businesses owned began to unravel.

It’s an important part of my thesis that what we’re experiencing is not ~new~, we’re simply seeing the balance of power between buyer and seller shift back to a more level state. Rather than be influenced by your marketing, I can compare notes with other consumers. Rather than have only one option for a product, I now have access to many sources from other places.

So part of my tentative conclusion is that businesses adopting social media as just another new means of influencing customers will not be productive, because the real shift is much deeper than just an adoption of technology. Human beings have been chaffing under the assymetrical power that businesses have used to turn them into disposable batteries, and social media is simply a reflection of how powerful that tide has become once the means to unleash it emerge. This isn’t idle speculation–we’re seeing some of the biggest industries of our lifetime buckle under a new reality where consumers have greater choice, greater access to knowledge, and a growing realization of the opportunities to flex their power. And I think one big part of the equation is also a new realization of the depth of meaning available in the interaction with a broader social group. Look at how many people are thinking more deeply about who they are, even if only for the purpose of creating a Facebook profile, or finding a voice on a blog. Again, I think this is a very real phenomenological shift, not just a surface trend of Web 2.0.

So against that backdrop, my point is that businesses need to have a deeper understanding of what’s really shifting in the marketplace. The “Magnificent Machinery” of turning customers into cash is being challenged. Businesses need to look carefully at the inherent mindset of “acquiring” “targets” with their sales “force”, and start understanding how their markets are becoming more like real communities, where businesses need to find a role that adds real value for consumers.

Let me say really clearly that this isn’t fuzzy humanistic and wishful thinking. I think there is a fundamental need for business to create products that people both need and want. I think there is a fundamental need for businesses to advocate on their own behalf, and to develop core competencies and ultimately new products based on a vision and not just a servile response to market requests. But they need to understand that the old asymmetry that allowed so much power over consumers is eroding, and eroding quickly.

{ 5 comments… read them below or add one }

Venkat September 28, 2009 at 7:51 pm

Hmm… yet another complex discussion. I am afraid my brain is too fried for the past week to process this, but hopefully I’ll alert-up enough later in the week to say something :)

Venkat

Venkat October 4, 2009 at 11:02 am

Okay, I am often driven to find the key point in complex arguments, and the one in yours seems to be this:

The shift in ownership of the tools of production, and the decrease in the information asymmetry, to the advantage of consumers, has changed the power balance between businesses and buyers. Marketing 2.0 is not primarily about learning a challenge, it is about learning to live with less power. And the only way to do that is become nicer, less greedy, more sharing, correct?

That is definitely an intriguing new lens through which to look at things. In the past, any shift in power between businesses and buyers tended to be reflected purely in price movements. William Whyte noted as far back as the 50s that the rise of discount retailers could be interpreted as businesses merely giving the more empowered buyers, who were doing some of the work previously done by salesmen and marketers, the money-value of their time in the form of discounts. Ikea is a modern example: you pay less because you assemble and haul.

To build on your argument, I think what will be different in the future is that Marketing 2.0 will no longer be able to use only lower prices as the way to reflect power-relationship shifts. Partly because so many products are already being sold at zero cost due to complex Web economics, partly because operating margins will not provide the room while businesses struggle to adopt more efficient 2.0 cost structures, but MAINLY because buyers are now demanding more than mere price reductions.

Your Kodak example shows, for instance, that buyers are now demanding as a requirement the customer-feedback-driven product development that previously was a corporate choice. No longer can companies make what they like and proclaim “any color so long as it is black.” Now it is “Give me features A and B or I won’t buy, and I’ll twitter to my tweeps not to buy either.”

So a good exercise for the marketing community, including your blog, is to figure out all the dimensions along which concessions must now be made to the more powerful buyer, what those concessions will cost, and what businesses must do internally to their cost models in order to offer those concessions and still make a profit.

This thread between you and me has straggled for a bit, and I am guessing anyone following along might be getting a bit lost. So it is time for me to make the story more coherent by offering up my next set of thoughts. You’ve now gotten me thinking more carefully about what the full “customer experience” really is, and what my definition of “a customer is a pattern of human behavior” definition entails.

Chris Kenton October 13, 2009 at 6:31 pm

I love the way you pull on different threads than those that were running in my own mind. Well done. Your take on the historical shifting balance of power as reflected in price is a great addition to the thread.

“Marketing 2.0 is not primarily about learning a challenge, it is about learning to live with less power. And the only way to do that is become nicer, less greedy, more sharing, correct?”

That’s an interesting take, but I would phrase it in a slightly different way–mostly because more mercenary-minded marketers disparage this as being some touchy-feely social fad, which I don’t think is accurate. As the balance of power shifts to buyers, and they have more alternatives to choose from, purchase decisions can be made on more dimensions than just price. The immediate additional concession is customer service and support. With more forums for customers to share experiences and search engines to make those conversations available, prospective buyers have access to real data with significant longitude. “If I buy X product, I can see from all these complaints on the Web that I won’t get good service. Better go with Y.”

But that is already broadening out to other issues as well: “This company is using child labor.” “That company is dumping waste.” All the way down to: “This company’s CEO has offensive political views.” (The Whole Foods debacle.)

To me, the simple way to think about these issues is not the economic frame–although it can be reduced to economics on the operational level–but to approach it from the social frame. That is, after all, the underlying drive of what’s happening. I think the approach is to recognize that what we used to think of clinically as “market segments” have become “networked customer communities”. These communities are growing organically around personal affinities shared online.

The challenge for business is to shift the view from economically precise exploitation to socially effective engagement, understanding there’s a huge economic benefit to this approach in the bargain. Company’s need to ask themselves what are the communities to which they most naturally belong, in terms of being able to provide real value from which they can profit. No one begrudges a company profit, they just want a reasonable exchange of value–and now they have the leverage of competitive choice to ensure they get it. Companies that get it are focusing not only on what product they can provide, but what role they play in the community in delivering value. Is their role the innovator? The low-cost supplier? What are the expectations customers have for this role, and for the exchange of value. If you have that kind of a relationship with your customer communities, my thesis is the cost and risk of marketing is effectively reduced. Not eliminated, but reduced.

You still have to know what you’re core competencies are–ie: the resource-driven company. You still have to advocate on your own behalf and differentiate your self. But your dialog with customers around the expectations of how the exchange of value is understood will take a lot of risk and cost out of what companies currently do by building products on a good guess and seeing if they fly in the marketplace, while flogging the hell out of expensive media campaigns.

I’d love your suggestion for how to make the conversation less straggling. I think we’re on to a good thread.

RG January 4, 2010 at 1:52 am

Hi,

I hopped on here from Ribbonfarm’s roundup post. Certainly an interesting dia-blog-ue going on between the two!

A few thoughts that struck me are:

-There has always been one advantage that a corporate entity exerted over its customer: scale (including access). One point you emphatically make is that scale is now also available to the customer in different ways, and that is the crux of many changes sweeping the marketplace.

-I source ideas, materials and transport channels to reach you this thing that you otherwise would need to spend much more to build or source yourself so you are better off paying me this price. To benefit from that scale I need to find enough numbers of you’s but I manage that, too, through the scale of my marketing activities on which I spend and still make profit. Today’s technology-triggered communication channels of communities have suddenly provided a new counterpoint that a customer is able to make: I now make decisions and choices not based just on your marketing spiel or a limited source of info. from acquaintances or experts who write. I have a growing base of your other distributed customers to listen to, a multitude of brand agnostic info. sharers. I, in turn, also hold the obvious threat of contributing to that collective voice out there that impinges not only on your profit from this transaction of ours, but your future growth.

-Pre-WWW, one example of this model was in user groups of big software companies, a phenomenon they themselves helped create. I am sure there are examples of such groups making life uncomfortable for the company’s product plans.

-I suspect there would be (or have been) instances of industries where this played out in the form of a large network of distributors exercising control over a small number of manufacturers.

-The scale equation has made many global businesses learn to discard their one-standard-for-the-world approach in India (and China I guess). The two cola giants, Kellogg’s and the fast food majors have all made 180-degree turns from their initial stand, and innovated purely based on the pressure coming from potential customers having the advantage of scale.

-MLM or network marketing businesses play a different game. My take on that model is that they avoid this problem by converting customers into the other side of the equation.

-The often-cached, easily-searchable aspect of online forums is significant. A relevant tip in a printed newsletter of a Windows user group in the UK was not accessible to someone in Sri Lanka the way an LG mobile phone user in Azerbaijan could find an undocumented workaround to play a music file quoted in an obscure bulletin board in New Zealand, even if the said post was subsequently removed at the behest of the company ["We forbid such customer manufactured innovative uses of our product..."--oops, did I use a forbidden phrase ;-) ]

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