The top five sources of increased customer power

Printed with permission from Prentice Hall and Wharton School Publishing

Chapter 1: Now Is the Time to Advocate for Your Customers

Watch Out For Growing Customer Power
New technologies such as the Internet provide easy access to tremendous amounts of information, and people have been taking advantage of that to become smarter shoppers. They are using digital technologies to gather information, to find competing products, and to talk to other customers. Increasingly, they are using the Internet to avoid pushy marketers and to help them make their own purchasing decisions. The Internet is a great enabler of customer power. What many hoped would happen with the Internet is actually occurring, and it will change how you do business.

The five proven sources of increased customer power are:

1. Increasing access to information: Customers now have access to information about a company and its products from a multitude of sources. From ConsumerReports.org for third-party information to Amazon.com for customer reviews and eBay for seller ratings, consumers now enjoy much greater access to independent information about a company's products and services. For example, more than 64% of car buyers now use the Internet to research car models, features, and prices. Sixty-eight percent of new car buyers rate third-party sites as very or extremely important sources of information, and they visit an average of seven different sites, such as Kelly Blue Book, Autobytel, and Edmunds. Many prospective buyers start their online research months before setting foot on a dealer's lot. And 6% go on to save an average of $450 per vehicle by using an Internet buying service. The implication: old-style marketing is less effective when customers have independent means to research a company's claims and obtain cost information.

2. Access to more alternatives: Customers can find competing products more easily. Search engines, comparison sites, and online reviews all enable customers to find the best products at the lowest price. For example, travelers now enjoy a range of web sites (e.g., Expedia, Orbitz, and Travelocity) that help them find the lowest fares on flights. Over 63% of leisure travelers and 69% of business travelers utilize the Internet for research.4 Internet sales grew 37% in 2002 to $28 billion, even as total travel services fell 5%—indeed, 35 million people bought tickets online in 2003. Leisure and business travelers increasingly refuse to pay high fares, causing much financial misery for airlines.

The Internet has also impacted the real estate market by making wider-spanning and richer information available to homebuyers. Online real estate buying services (such as eReality and ZipReality) rebate up to 1% of the purchase price, thereby lowering commissions and saving customers thousands of dollars on the purchase of a house.

3. More simplified direct transactions: Customers can buy from anywhere, regardless of physical location. The Internet simplifies transactions for both consumers and industrial customers. Customers can connect directly with providers to buy goods and services. For example, online ordering and direct shipment make buying books and electronics possible at any time without leaving home. Electronic airline tickets eliminate the need to obtain paper tickets, thereby reducing people's dependency on local travel agents. Simplified transactions also enable switching—the Internet gives customers the power to find and buy from a wider array of potential providers.

4. Increasing communication between customers: Prospective customers can find out if a company has mistreated former customers by consulting and collaborating with them through the Internet. In 2002, 110 million Americans looked on the Internet for healthcare information. An additional 48 million consumers in Japan went online for healthcare information, 31 million went online in Germany, and 14 million went online in France for health data. Active online communities exist for virtually every disease. Patients exchange information about the effectiveness of products and provide advice to each other about how to take control of their medical treatments. When a customer requests a specific prescription, 84% of the time that request is honored by the doctor. Sites such as epinions.com or planetfeedback.com make it easy for customers to submit their opinion of a company or product and for other potential customers to find these ratings. Increasing communication between customers amplifies and accelerates word-of-mouth marketing. In the past, bad companies lost customers one at a time. At worst, the occasional exasperated ex-customer might convince a few friends to stop buying from the company. But now, the Internet provides global reach for the disgruntled. Web sites such as thecomplaintstation.com, rating services, and discussion forums accelerate the process of weeding out bad products, bad service, and bad companies. On eBay, customers give positive and negative comments on sellers, and even a few negative comments can immobilize the seller's auction by reducing the number of bidders. Very visible star ratings summarize the seller's reputation in terms of the quality and quantity of comments.

5. Increasing control over contacts: Customers can avoid a company's marketing efforts. Consumers have more control over the flow of marketing messages into their homes and lives. Consumers' distaste for junk mail, telemarketing calls, spam, and pop-up ads means that these pushy messages are more likely to earn ire than profits. Technology empowers consumers by letting them mute or zap TV commercials, screen telephone calls, block pop-up ads, stop telemarketing, or send spam straight to the trashcan. For example, 94% of people "distrust" pop-up ads, over 20 million have installed pop-up blockers, and over 50 million people signed up for "no call" protection.

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