Locking in customers in the digital age

In case you haven't noticed, something big is happening in the relationship between consumers and commercial and public sector organisations. Rather than simply accepting whatever products, prices and conditions organisations can offer, consumers are using the weight of their numbers and technology to redefine the rules of engagement.

The old way of doing things – the military-style model of business that involved customers being segmented, targeted, and made captive– is no longer a relevant way of looking at the market. Far from being “captive”, consumers are realising that they are the ones with money and therefore, power. We are all consumers. Organisations want our business and we are all free to make our own choices.

CRM has failed

One thing that has become glaringly apparent is that the customer relationship management (CRM) suites of software that were supposed to help organisations neatly define and manage customer relationships are turning out to be less effective than first imagined. The applications are creating a mountain of data, but whether the data is helping to cement the supplier-customer bond is debatable. Essentially CRM has taken business from mass production to mass customisation however fall well short of being able to deliver individual customisation. Consumers don't always choose to act in expected ways. An organisation can note individual preferences and use that information to create special offers or to deliver targeted promotions, but increasingly, organisations are discovering that it's not enough.

The reality is that Australian consumers buy on price and defect on service. To win a customer's patronage the price has to be right every time, not just for one special offer. No matter what the price however, if the service doesn't live up to expectations every time, the customer will quite likely take their business elsewhere in the future.

If CRM-style customer profiles are to truly assist in developing a relationship between the consumer and organisation, perhaps it is time for the technology-savvy consumer to be invited to maintain their own profile and to have Vendor Relationship Management tools. It could only add to the transparency and authenticity that consumers are looking for.

It couldn't happen without technology

While CRM applications haven't achieved their potential, other forms of technology have been outstandingly successful in giving consumers new channels, more choice and a voice. Once we had to physically walk into a store or office to transact with an organisation. Now we can research, locate and purchase goods or services using a mobile phone. There are contact centres managing chat services, email, telephone calls and social media. We can engage with a service provider as closely or remotely as we choose.

As we become more aware of our power in the relationship, we consumers are becoming more demanding in our product and service expectations. We expect the right to specify exactly what we require, even to the level of designing our own experiences.

Some online organisations have recognised this and are building successful businesses based almost entirely on giving consumers choice. StyleRocks.com.au, for example, is an Australian site that allows customers to design their own jewellery, choosing from 3.4 trillion possible design combinations. By selling online, the company avoids the overhead of maintaining physical retail premises, allowing it to keep product prices comparatively low. It also benefits from a potential global reach.

The consumer voice is being amplified by the Internet and more particularly, social networks. The marketing media is full of stories about brand profiles that have suffered due to customers airing their grievances on social networking sites. But consumers are also using these technologies to create powerful buying groups, to lobby and negotiate change.

One Big Switch, which launched in Australia in 2011, is a great example of this. The site, which calls itself “the next generation consumer network”, brings interested consumers together to negotiate discounts on household goods and services such as home loans, electricity, gas, health insurance and broadband. The more members that sign up to wanting a particular service, the greater the network's buying power.

The shift in power is also reflected in the rise of sites that turn the tables by inviting organisations to quote and compete for the consumer dollar. ServicesSeeking.com.au is a good example, allowing individuals to seek and compare services quotes from local businesses. A similar story (albeit on a slightly larger scale) can be found at international sites such as Cruise Compete and Vacation Compete.

It's time for organisations to recognise that things have changed and that consumers are well-positioned to make the most of their new power. Consumers have the numbers and are generally determined to seek out the best deal and service possible. Unlike fifteen or even ten years ago, consumers have become extremely adept at using technology to research and transact. There's no hesitancy about ordering from a company on the other side of the world. Most importantly, where retailers and service providers once set the terms, consumers equipped with social media, online and mobile applications, are banding together to flex their collective buying muscle.

Welcome to the new paradigm: the consumer power economy.

Dr Catriona Wallace is the managing director of customer experience strategy management consultancy Fifth Quadrant.