Consumers are Gaining More Power Than Firms Because They are Quicker to Adopt Disruptive Technologies
The Shift Index
For further context and insight on this topic, please reference the following sections of the 2011 Shift Index report:
In decades past, the possession and protection of stocks of knowledge set apart the powerful from the uninformed. Today, however, it is one’s ability to harness flows of knowledge made possible by the digital infrastructure, which gives advantage.
One clear outcome of this phenomenon is an upward trend in our Consumer Power score, which measures the value captured by consumers based on the degree to which consumers perceive they have choices, convenient access to and information about those choices, access to customized offerings, the ability to avoid marketing efforts and minimal switching costs. In 2011, 49 percent of consumers surveyed strongly agreed that they have more information about brands and products and 47 percent of respondents strongly agreed that there wasn’t much cost associated with switching between brands. Only 6 and 7 percent of respondents strongly disagreed with either of these statements, respectively.
Brand loyalty is on the decline. Consumers today are inundated with more brands than ever before. The average supermarket in 2010 carried 38,719 stock-keeping units (SKUs), a drastic increase over prior decades. Consumers also now have access to information from more trusted sources to evaluate brands and their purchase choices no longer rely solely on advertising claims. Brand Disloyalty is inversely related to age: Younger consumers are less loyal to brands than older consumers. Younger consumers, born in the Internet era, generally rely less on brand names as an indicator of product reliability, turning instead to the Internet for product and service information, user reviews and feedback, as well as substitutes.
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Relations between vendors and consumers are changing profoundly as product choices expand and consumers have increased access to information about these choices. Vendors once had the upper hand, but in the world of the Big Shift, consumers are gaining power back. Consumer power stems from different sources, including increased choices, lower switching costs and easier access to product information. The transparency of information empowers customers to make more informed decisions and compare alternatives more easily. The Internet and more recently mobile applications, give consumers access to price comparisons, customer reviews and more. In what Wal-Mart stores’ Chief Executive, Mike Duke, calls “a new era of price transparency,” stores are losing the advantage over customers as shoppers are more inclined to perform due diligence, either beforehand or in the store itself.
For customers in this newly integrated world, switching costs are low, often requiring only the click of a mouse. With remote transactions made possible by the Internet and mobile browsing, consumers can buy products and services from nearly anywhere, at any time. This means that consumers are no longer limited by proximity to certain retailers and can exercise greater discretion in their purchasing decisions.