The View from the Glass House
By Ajit Kambil, Patrick Conroy and Ryan Alvanos
Photography By David Clugston

Competing on design

The fourth platform for competition in a transparent world is differentiation through design. Retailers and CPGs trying to compete in transparent markets need to cultivate their abilities to develop emotionally resonant retail environments, product designs and interactions for their customers. Apple’s iPod is the leading MP3 player not because of superior technical features, but because of its compelling design. The Aeron chair, the Dirt Devil Kone, and Target’s contract with Michael Graves to design tea kettles speak volumes about the importance of emotionally resonant product design.

Another dimension of design is to offer compelling interactions and choices to consumers. In the transparent marketplace, companies have new options for differentiating transactions and channels to the customer. Do they give a direct fixed-price purchase option online, or use Internet auctions and other formats for product purchase? eBay, which emerged as an online auctioneer, recognized the fact that monolithic transaction designs no longer cut it, and added the “buy it now” feature that drives over 30 percent of its business. Companies will have to rethink their offerings beyond the product to the transaction.

Competing on brand

The wide proliferation of electronic publishing channels makes transparent markets noisy. While new channels become informative sources for customers, they can also generate information overload that taxes the consumer’s cognition. In such a noisy world, brand becomes more important in reducing the customer’s search costs. Investing in brand and consistently delivering the brand promise can help differentiate products and services and help consumers cut through the clutter in product consideration.

Strategic push-pull

At the core of all the above strategies is information about companies’ products and services, management, and actions. Companies will need to master “pull” and “push” information strategies to execute in the transparent marketplace. They will have to invest in systems that “pull” information about customers and other stakeholders on a wide variety of topics. Today, the Internet provides managers with the ability to gather strategic information proactively. For example, a chocolate company can proactively identify promising research showing that dark chocolate has favorable medicinal properties. If the results are promising, the company can use them to proactively make a market in nutraceutical chocolates. Today’s transparency dramatically reduces the costs of pulling information that can strategically change the product market mix. The key is to identify that information ahead of time.

Beyond pulling information, companies will have to develop more coherent “push” strategies that preserve their reputations in readily available company information and make their brands stand out in a noisy world through enhanced customer interactions.

Retailers and CPG companies will have to learn how to deliver offerings to customers in multiple venues and across multiple channels, like the location-aware coupon or multimedia product information, to motivate an impulse purchase. At a more strategic level, there is opportunity for retailers and CPG companies to alter the level of customer “involvement” with products and services. Involvement is an emotional state where a product category becomes interesting and exciting. It is a motivational force that leads consumers to a specific choice and action. While some people may find handbags more exciting than others, allowing previously uninvolved Web-surfers to vote on three different handbag choices to help a shopping-damsel-in-distress on Kaboodle.com changes this level of involvement.

Thus, the strategic push of information through social marketing and other sites can change the level of product/service involvement of different buyers. Executing such strategic information “push” strategies will require a new integration between marketing, communications, public relations and the information systems functions of the firm or greater collaboration with third-party vendors.

Companies can choose from a number of alternative strategies for competing in a transparent world. The challenge for managers will be to choose the right level and mix of strategies for responding to transparency. Companies offering high-value, high-margin products that deeply involve customers are more likely to implement a broader variety of strategies. Yet, as the costs of information “push” strategies go down, companies with low-value products will also have opportunities to change the level of customer involvement, making brand and other product attributes more relevant to customers.

Prosperity in the glass house

Increasing transparency creates new opportunities and risks for retailers and product companies. Consumers and other stakeholders are increasingly empowered by information, the ability to generate insight from information, and the ability to undertake collective action in support of or against companies. However, all is not lost. By focusing on creating customer trust through exemplary behavior, co-creating value with customers, increasing responsiveness, competing on design and brand, and the proactive use of information, companies will be better positioned to take advantage of the new opportunities for differentiation and competition in the glass house. DR

Ajit Kambil is the global director of Deloitte Research, Deloitte Services LP.

Patrick Conroy is a principal in Deloitte Consulting LLP and the leader of its U.S. Consumer Products industry group.

Ryan Alvanos is a writer and editor with Deloitte Research, Deloitte Services LP.

Endnotes

1. Hotel News Resource. “Travel brands most at risk from user generated comments.” Accessed September 28, 2007.

2. IconNicholson. “Social Retailing Meets Bloomingdale’s.”

3. TeamBuy Web site. Accessed September 28, 2007.

4. “101 Dumbest Moves in Business.” CNN Money. Accessed September 28, 2007.

5. Seidman, Dov. How: Why How We Do Anything Means Everything… in Business (and in Life),

6. Gumbel, Peter. “BMW Drives Germany.” Time in partnership with CNN. Thursday, July 5, 2007. Accessed September 4, 2007.

7. Tremor Homepage. Accessed September 4, 2007.

8. Betts, Mich. “Unexpected Insights From Data Mining.” Computerworld. Accessed September 26, 2007.

9. Barbaro, Michael, and Justin Gillis. “Wal-Mart at forefront of Hurricane Relief.” Washington Post. Tuesday September 6, 2005. Accessed September 28, 2007.

10. Davenport, Thomas H. and Jeanne G. Harris. Competing on Analytics: The New Science of Winning. Boston, Harvard Business School Press. 2007.

11. Email correspondence with Dwight Moore, vice president of Corporate Marketing, Cellfire Inc.

12. Harris, Jonathan and Sepandar Kamvar. “We Feel Fine.” Accessed September 28, 2007.

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