Attack of the 50-Ft. Empowered Consumer

A lot has been said about how the Internet is turning many industries on their heads while putting consumers in control of relationships once dictated by businesses. Curiously enough, unlike most Internet hype, few of these conversations have registered on our Internet PR polygraph even after several recalibrations and a Fonzie-like kick to its side.

Why? Because despite the e-tidal wave of disinformation, inflated hype, and get-rich-quick schemers and dreamers, this is one of the few statements about e-business that’s fundamentally true.

Businesses that can’t change the way they think about their customers should be shaking in their boots. Unfortunately for most of them, they won’t realize it until it’s too late. And very few of them will be reading, or believing, this article.

For the rest of you, this marks a great opportunity to capitalize on the changing dynamics of consumer relations. And one of the best ways we can describe these changes is through the concept of the empowered consumer.

Step One: Admit You Have a Problem

The Internet has given consumers a very big stick. Under the new rules, businesses no longer control the messages about their products, services, and practices. They must learn to listen more and talk less. They can no longer leverage consumer ignorance to inflate their margins and to shield themselves from competition.

For many traditional businesses, denial is typically the first reaction to these changes. The music recording industry, for example, has chosen to bury its head in the sand when confronted with developments such as MP3s, artist-controlled distribution, and Napster. Likewise, many physicians have no clue that one day they may have to ask permission to view a patient’s medical records instead of the other way around.

This is a purely terrifying concept for many traditional businesses to swallow. For stuffed suits schooled in the old way of doing things, this is perhaps even more threatening to their prevalent social belief system than the civil rights movement or women’s lib ever was. With the new rules of business, the choices are to either revoke their engrained beliefs or risk irrelevancy and being undermined by a new brand of competitor.

Step Two: Open Closed Systems

The natural, impulsive response to the threat of change is an attempt to establish control and to seal off risk. In reality, this is one of the worst things a business can do on the Internet.

You often see this response in a company web site that seemingly denies the existence of competitors or additional consumer information beyond itself. For instance, linking to other resources that could lead your site visitors astray is akin to giving a competitor counter space in your own retail store, right?

Just whom are we really kidding here? This is precisely the nature of the Internet. Businesses must think open and compete on those terms. Anything less would be a charade.

“One-click” is more than a (debatable) patented e-shopping process; it represents your customers’ switching costs for going to another web site with information or services that you’re not providing. Users can go anywhere or use anything they want on the Internet, with or without your help or permission. And as counter-intuitive as it may seem, wouldn’t you better serve your customers’ needs by giving them improved access to what they want anyway?

Historically, centralized ownership and closed systems have always been dead-ends on the Internet. Many of the greatest Internet innovations from online communities to viral marketing to the invention of the web itself have taken place at the end-points of open systems where others were allowed to build upon and extend them.

“Quick! What has 10 million employee options, a foosball table, free office massages, and acts like an 1880s steel mill?”

But don’t think for a minute that “innovative” Internet companies aren’t guilty of a closed-system mentality. Look no further than eBay. eBay recently filed a lawsuit against Bidder’s Edge to prevent the latter from using web robots to cull auction information from its site, which Bidder’s Edge used to develop a sort of aggregated auction portal. Instead of trying to block a useful consumer service, eBay should have thought of the idea first.

Even Yahoo is somewhat guilty of this. As Yahoo changed focus from a directory with millions of off-site links to an Internet media company with a jones for fly-paper-like “stickiness,” they developed vertical products in areas such as sports, news, and finance. As a system that is closing ever-closer to only their own branded offerings and partnerships, Yahoo is placing every one of their vertical products in direct competition with best-of-breed, niche providers in each of these categories.

While Yahoo hopes that the promise of horizontal product integration will be its saving grace, ask any German historian about the virtues of waging concurrent wars on multiple fronts. And though they have the luxury of immense traffic, the same could be said of network television before specialized cable TV channels ate them alive.

Contrast this with the strategy taken by Netscape. Netscape helped launch the Open Directory Project, which wisely conceded that the only way to keep up with the dynamics of millions of web pages was to open its direction and control to the public. Similarly, My Netscape’s ingenious Rich Site Summary (RSS) standard acknowledged that no one, centralized agency could keep pace with the varied personalized web page needs, ideas, and innovations that an army of potential content providers could provide at the Internet’s edges.

You have to wonder where these initiatives might otherwise be today if not for the Netscape acquisition by long-time defender of closed systems, America Online (a move not unlike handing over the Los Angeles public transportation system to General Motors).

Step Three: Your Customer Is Not an Idiot

Our last point advocates the demolition of business practices that presume uninformed consumers.

A few years ago, some of the most disruptive information the Internet facilitated between consumers thwarted a McDonald’s Disney trivia game where the winning answer for every game piece was posted online for those who knew where to look, forcing McDonald’s to shut down the contest weeks early. Today, millions of consumers have access to a myriad of news stories, up-to-the-hour competitive pricing data, product and service information from multiple sources, and countless consumer opinions.

Consumers have never had so much information at their disposal to make informed purchasing decisions. And while many new economy companies have designed themselves around this fact, we find supposedly clued-in e-businesses still unclear on the concept.

Priceline.com is a perfect example. With the help of William Shatner’s schmaltzy crooning (of something other than “Lucy In the Sky With Diamonds”), Priceline.com positions itself as an advocacy tool of the empowered consumer. However, Priceline.com fails to get half of the new economy equation right.

Priceline.com doesn’t pay for Mr. Shatner’s singing lessons on flights to Cancun with $59 bids. Instead, they make their profits from the $79-a-night, off-season Hawaii condo that a buyer presumed was a steal for $99. Of course, the buyer has no idea what the room is normally worth. Even worse, Priceline.com’s model doesn’t even allow the buyer to know what hotel they’re bidding on or even if they’ll get a place to stay.

Priceline.com’s insistence on a buyer’s uncertainty over the brand, time-of-flight, list price, and even the transaction productizes consumer disinformation. Should Priceline.com offer dental services in the future, one can imagine a scenario where patients are assured of a tooth extraction, but there’s no telling which one. Where’s the information revolution in that?

Priceline.com’s “unfinished” idea is an invitation for others to compete. A model that collects this already-available information and provides it up-front will usurp any Internet business model based on the idea of uninformed consumers.

In comparing the old business model of uninformed, non-empowered consumers to the new model where a wealth of information and competition lurks around every corner, each of us has to make a decision as a consumer and a business: Which side do we want to be on? It’s already obvious where consumers are going. Given that, businesses have arguably had their choice already made for them.