May 10, 2007
A New Model for Individuated Consumption
By Rick Moss
So, the digital revolution has been in gear for a number of years now. Anyone notice a big improvement in the health of the retail industry? Seems like margins are still eroding. How about customer satisfaction and trust in companies and public institutions? Getting any better? Studies indicate they’re pretty darn low.
According to James Maxmin, who addressed a largely IT-oriented crowd at the FMI Show on Tuesday, the revolution isn’t working and our system of business is just plain broken. Mr. Maxmin’s pedigree is pretty impressive. He’s the former CEO of Volvo UK, Thorn EMI Home Electronics, and Laura Ashley PLC. In his current life, he’s founder and chairman of a private investment company, Global Brand Development and co-author of The Support Economy: Why Corporations are Failing Individuals and the Next Episode of Capitalism. Mr. Maxmin believes that we are failing to make use of our “unprecedented access to information” in ways that satisfy customers. He explains the problem as a gap – more like a chasm, actually – between an increasingly demanding consumer and the enabling digital technology.
It’s Mr. Maxmin’s premise that people, in essence, have changed faster than the institutions that serve them. They’re better educated, more diverse and in need of a much more customized constellation of services. What’s missing – what’s supposed to fill the gap – is what Maxmin calls a new “enterprise logic,” a process of connecting consumers with products and services.
With the last enterprise revolution, according to Mr. Maxmin, the new enterprise logic was invented by Henry Ford. He came up with the hierarchical management model and assembly lines needed to spur the creation of the mass-market. It put a car in every driveway, but began the inevitable process of distancing consumers from the businesses that serve them.
What we’re experiencing now are the death throws of that state…the bottom of a downward spiral that has alienated consumers and dissolved trust and loyalty. We talk about “consumer-centricity” and try to apply new technology but it’s not working. We’re trapped within an antiquated model designed to serve a mass-market when, in actuality, we’ve already evolved into a “new society of individuals.” Businesses have the digital technology but no new enterprise model to connect it with the multifaceted demands of the new consumerism.
What’s the answer? Essentially, turning the model on its head: mass consumption becomes “individuated consumption.” The individual consumer decides what’s valuable rather than it being pre-determined by producers of generic goods and services for the masses. Rather than the product, the individual becomes the “unit of analysis” that the enterprise uses in determining how to structure itself.
Mr. Maxmin is testing his theses (in the fields of investment banking, health and higher education) with “federated support networks” that allow people to go online and design the suite of services that’s right for them. The new model suggests the possibility of integrating a “kaleidoscope” of support services that consumers need to live their lives: learning, finance, security, health, entertainment, consumer goods, etc. Putting the consumer in charge is the big paradigm shift, analogous to the way eBay let the customers run the store. And it brings new meaning to the whole customer-centricity thing, because no matter how targeted your marketing – how granular your data – you’re still pushing products through to the mass market the Henry Ford way unless you figure out how to hand control over to the individual consumer.
Discussion Questions: Do you agree that our mass-market model, despite the tech “advancements,” is incapable of accommodating the demands of customer-centricity? Do you see ways of serving “individuated consumption”?
Discussion Questions
Poll
BrainTrust
Recent Discussions
More Discussions
Is Cyber Week Set To Smash Sales Records This Year, as Salesforce Suggests?
Salesforce suggests that Cyber Week will set records in terms of sales this year. Is this…Should Target Associates Be Mandated To Smile?
Target’s 10-4 plan calls for associates to be much more involved in greeting customers, as part…Will Target and ChatGPT’s Team-Up Actually Improve the Retailer’s Fortunes?
The Target app is hitting ChatGPT soon. Will it move the needle in Target’s favor?
Seems to me we are already well down the road of individuated consumption. That’s what mass customization is all about, and savvy retailers have been doing that for 20 years. The supply chain may still look like a mass market model from certain vantage points, but it’s not how consumers access or experience it. They are picking and choosing–“individuating.”
As for customer centricity, again, there are thousands of examples of successful programs that are delivering the wanted products and services to exactly the consumers that want them, where they want them, when they want them.
This “forward thinker” is actually well behind the times.
For too many retailers, there is only one customer who really matters: the CEO. If the CEO has great vision and empathy for the customers, the organization is customer-driven. Otherwise, the retailer will be like 10,000 others, copying its competition, trying to minimize its expenses, and experiencing mediocre financial returns.
Rick’s holiday scenario sounds like the perfect Web 2.0 startup for this group. Have we got any coders in the BrainTrust?
I do think it will take a startup to deliver the kind of service he envisions, for all the reasons we’ve seen in the comments–organizations resisting change, current models being product-centered rather than customer-centered–and more.
There is an offline piece I would add. There’s a story that, early in the development of baking mixes, the ones where you just add water didn’t test as well in focus groups as the ones where you add water and oil, because the respondents wanted to feel more as if they were really baking.
Likewise, I suspect there’s a consumer (and she may be me) who really needs to be able to throw a big holiday together in a couple of hours of online shopping and planning, but wants to feel as if s/he did more. Or maybe s/he likes that one ritual mall trip, to see the decorations and maybe have a holiday lunch with friends or the kids.
So it would be nice to tie in the online service with an offline component–maybe a concierge service in participating malls and other, newer kinds of shopping centers. They could help consumers get the process started, as well as being the place they can pick things up after shopping online, and maybe answer questions throughout the process.
The idea would be to give the consumer the idea that he or she did more than just click a mouse, just as in the mid-20th century, home bakers wanted to feel as if they did more than just add water.
A scenario may help. Thinking from a consumer perspective might suggest a service that allows for the planning of occasion-based or lifestyle-based purchases…comprehensively covering both of products and services. For instance, picture a web-based service that would allow you to plan out your entire Christmas holiday experience: shopping lists; address book; product directories; price guides/promotional alerts; travel planning; menu planning, etc. All services would be integrated so that, for instance, a menu would generate a shopping list, tied to your event calendar, so that it could be ordered online or picked up in the store at the appropriate time. And, as opposed to surfing numerous websites, establishing user accounts in each and juggling all your planning information separately, all would be done seamlessly. Mr. Maxmin uses the “concierge” metaphor, and that seems apt.
I was at that session, and what Maxmin presented was a really complicated concept, and it’s difficult, at least for me, to get my head around it because we approach it from a product-centric worldview.
I run into this problem all the time when I talk to retailers. A consumer electronics retailer, in trying to be more customer-centric, was talking about the services it could add – but they were focused on home installation, and warranty, and repair. Yeah, those are services, but that’s not what we mean when we talk about using services to enhance the customer experience in a customer-centric retail model. It should be more like, “here’s the most tricked out car sound system – it has components from 3 different manufacturers, but we’ve already made sure that they all work together for you, and here’s what it will look like if we install it in your particular model of car,” or providing free interior decorating advice as part of the home theater sales model.
There are fundamentally only three types of consumers, for any product category, in a new services-based model:
1. The kind that want to both select the products and want to be the primary enabler of the experience around those products. These are the people who order and install their own kitchen cabinets – they want a fabulous kitchen, that’s the experience, but they also want to pick them out and they want the “pleasure” of enjoying their own handiwork. Works for groceries too – these are the foodies that hand select with care all their veggies and meats and go home to prepare the gourmet meal.
2. Then there are the kind of people who want to select the products, but don’t want to be the enabler of the experience. These people order kitchen cabinets and pay to have them installed, or buy pre-assembled meals they finish at home.
3. Finally there are the people who don’t really care about the products, and they don’t want to enable the experience – they just want the outcome. These people hire interior decorators or eat at a restaurant.
How we organize as retailers to serve these three types of customers could fundamentally change retailing – and consumption/consumerism. It’s looking ahead to how that model will really work that Maxmin was trying to share, and it’s cool – but it still gives me a headache trying to think it through to a clear vision of the future.
Consumer-centricity is at once a business approach and a set of techniques. To our collective credit, industry innovators have taken the philosophy to heart–and as a result we now have better methods for studying, classifying and interpreting consumer needs than ever before.
But accumulating more and more accurate consumer insights does not translate into consumer-centric action–unless we design process and practice to put the power into the consumer’s hands and engineer our businesses to respond to that. So far, this implementation is sorely lacking at every level I can think of, most visibly in the store.
Time to point out again the elephant in the room: True consumer-centric practices will inherently conflict with mass production, scale economies, supply chain efficiencies, and even the way capital is typically invested in the consumer market. To make matters more intricate and challenging, the desirable degree of consumer-centricity will vary by product, by consumer, and by situation (need state).
This reality quite naturally sets up an organizational tension between consumer-centric marketers and production-centric manufacturers and efficiency-centric logistics people (not to mention mass-media centric ad people). Organizational and infrastructure changes are needed to actualize true consumer-centricity, but rapid moves in this direction would very likely prove alarming to capital investors who derive a sense of security from brick and mortar.
Perhaps perversely then, our largest and most powerful retail and consumer product companies face the greatest obstacles when they attempt to incorporate consumer-centric business practice. “Individuated consumption” seems like a laudable goal, but even that must happen on the consumers’ terms. That will require organizations to do more than re-tune their models–they may have to redesign them from the chassis up.
I observe this in 2 tiers:
1) Mass retailers & suppliers that are growing their market share, partially by using better data and systems to:
a) efficiently test and introduce the products and programs that will appeal to the largest number of their target customers
b) customize, to the extent possible (and practical), their offerings to different market segments
A notable large retailer that was early and successful in using sophisticated systems to personalize the consumer experience, of course, was Amazon.com. Product-wise, Target has a knack for developing “must have” versions of items ranging from commodities to impulse buys that appeal to many, but make the consumer feel like “they made that just for me.”
2) Retailers that are growing by developing products, programs and systems that are designed to tailor themselves to meet the needs of the customer. I see this as a growing and somewhat untapped opportunity with many applications, particularly for those who want to differentiate themselves from the mass retailers. In these cases, there has to be a reason for and an added value that comes with the customization, because it generally comes at a higher cost. CafePress is a good example of a company that is leveraging this.
Not so fast, Roger. Sure, the idea isn’t new, but it seems that the implementation of it is quite small, so let’s look a little further.
We are smack against the problem that every single organization in the world has: resistance to new ideas. This is not a generalized concept–this resistance is the product of specific, measurable forces that require particular analysis and methods to overcome them. This can be done relatively easily if you know these things. But there are two aspects that make this even more difficult: virtually no organization in the world is able to view its own resistance; instead, organizations label new ideas as “unworkable” or “impractical” or “just plain weird.” In other words, organizations view the IDEAS as the problem, not the organization. This means that in a larger sense, organizations are unable to change in significant ways on their own. Note that I said “in significant ways.”
It seems we assume that with the right information (as referenced in the beginning of the discussion), or enough of it, or presented in the proper way, that this information will sink in and change some organizations, and they will change–it seems that we assume information or knowledge has this kind of power. In some instances it does have power, but not in all instances. We may be seeing this dilemma now as we realize: yes, there is a lot of information about this very problem described in this discussion, and there has been a lot of this information for decades, and yet this information has had very little impact.
It isn’t that business can’t provide more individuated offers, it is that most businesses don’t want to. For the near future mass customization masquerading as individual offers will be the order of the day. That’s still where the money is.
The phrase “individuated consumption” caught my eye in a Retail Forward e-newsletter and I had to engage. The National Retail Federation a couple of years ago presented research demonstrating consumer pursuit of value: The same people will buy skivvies at Wal-Mart or a $3,000 Gucci business suit depending on personal perceptions and the value proposition.
Starbucks is leading individuated consumption with its expansion into music and satellite radio. The music is selected to reflect an integrated trend of lifestyle, thought and art that serves to define the Starbucks customer. The offering is more than just coffee; it’s personal identification and self-validation. It’s individuated and self-actualized.