Disruptive Capitalism: The Rise of the Social Consumer

By Rob  |  24 Jun 2014, 10:30am  |  Category: Social Media

The rise of the social consumer is happening. For the first time in human history the consumer is gaining real power over the corporations that exist to serve them.

But to this day many have hold the view that the consumer is merely a victim. The play thing of evil corporations and complicit governments. Views like the ones held by American Labour activist Cesar Chavez have been widespread...

"Who gets the risks? The risks are given to the consumer, the unsuspecting consumer and the poor work force. And who gets the benefits? The benefits are only for the corporations, for the money makers."

Some corporations exploit and do bad things. But it is a gross oversimplification to suggest the consumer is or ever was docile, stupid or without power.

As the famous advertiser David Ogilvy said...

"The consumer isn't a moron. She is your wife."

A more modern turn of phrase might be to say...

"The consumer isn't a moron. They are your life partner..."

But I'm sure you understand what Ogilvy was suggesting. You don't think the people you love are morons so why would other consumers be morons..?

It is fair to say though that for a long time -- certainly since globalisation kicked up a few gears after WWII -- that the tables have often been balanced in favour of large corporations.

The average consumer lacked good information about the corporations they consumed from. The means of communications with large companies were overly structured and stratified. And at times there was a lack of choice and there was certainly a lack of consumer 'solidarity'.

However with the rise of the internet and particularly social media this is changing -- quite significantly.

Let's put this in context. 15 years ago very few people knew what a search engine was or how to shop online. Most thought the internet was a haunt of geeks. And dial up was hardly impressive. But last year Google turned over $60bn and Amazon made $75bn.

Just 10 years ago no one had heard of social media. Today Facebook has over 1bn users and turned over nearly $8bn last year.

And to look at it another way, since the rise of the Internet $40bn or 2/3rds of the market value of print media has vanished -- gone elsewhere.

We are also seeing a new generation of entrepreneurs with very different social attitudes rise to prominence. They have a more 'liberal' approach and seem to believe they can use their businesses to truly change the world.

Google's slogan says "don't be evil". OkCupid blocked the FireFox browser because Mozilla appointed a CEO opposed to gay marriage. And even more recently Elon Musk of PayPal released over 250 patents for his electric car company Tesla -- to increase innovation and competition in the industry.

We might even call this neo-philanthropism. And this can be seen in the generosity of many tech founders. Bill Gates is a prominent example. But just last year super-nerd Mark Zuckerberg, of Facebook, gave $992m to charitable causes.

But of course change does not occur without its problem. The rise of the internet has led to the rise of big data and the ability to track vast amounts of information about individuals. And while most companies may only use it to annoy us with adverts the data can be used for far more sinister purposes.

Government's around the world are very interested in this data. And I would argue not because they wish to protect us from the 'terrorists'. But because it provides them with incredible insights, power and the ability to control society. One might argue it has the potential to turn the average bureaucrat into one of Plato's philosopher kings...

All clouds though have a silver lining. And one can argue that without the internet WikiLeaks and Edward Snowden could never have happened. We also have far greater exposure to what our government's get up to in far off lands. And as with the Islamic State of Iraq and the Levant we can see the very real and very brutal consequences of their actions like never before.

So while this change is not a bed of roses. Or at least we must remember all roses have their thorns. To suggest something significant isn't occurring is quite simply ridiculous. We are at the beginning of the greatest social and technological change since the industrial revolution. Quite where this will take us we can't be sure.

However it is already beginning to affect us. Particularly in the way we consume. On the surface and on a fundamental level consumption hasn't changed. We still buy things we need, want and don't need from trusted suppliers. Often this is to our benefit and occasionally not.

But at no stage previously has the consumer had more choice, more information and more power. And this is having a significant impact on companies and corporations.

One important change is the rise of the niche consumer. Consumers can now live their lives without the need to engage with the major corporations. Platforms like eBay which allow anyone to sell anything to anyone now turn over $16bn and support a global economy of 'market traders'.

Millenials, those born after 1979, have very different attitudes and buying habits to older generations. Research shows that 72% of them now research products online before they purchase in store. One third only purchase what is necessary and refuse to pay full price. And 32% don't buy from companies who have distasteful social practices. Put simply Millenials are more informed and take more care over their purchases because for the first time, they can.

As American retail expert and Forbes contributor Robin Lewis says...

"Having thousands of places to shop quickly right at their fingertips, or in a niche boutique conveniently located across the street, Millennials are increasingly pursuing special, exclusive “just-for-me” products — because they can. Given this shift in behavior, why would they want to go to a store selling clothes that appear on the bodies of millions of their peers?"

This growing level of choice the internet offers and consumer demand for exclusivity is leading to more competition and less stability for companies and industries.

We've already seen the collapse of chunks of the traditional music industry. Stores like HMV and Woolworths have disappeared and been replaced by platforms such as Spotify. An App that gives music fans far greater control and choice over the music that they listen to.

New Taxi Apps like Uber and Lyft are causing outrage among our corporate friends the black cab drivers. Because the cost is lower, the service is of a higher standard and the process far more efficient for everyone.

Even the bastion of corporate, regulated monopolism -- British banking -- is under threat. Platforms like Zopa allow people to borrow and lend among themselves. PayPal is almost doing away with the need for a bank account. And crowd funding websites like KickStarter and Indiegogo allow businesses and individuals to raise capital directly from consumers, fans and investors.

Never before have so many companies been under so much threat. And that's without discussing BitCoin...

A second very important aspect of this process is social media. Which is driving forward the concept of the social consumer.

This new consumer shares the purchases they make and the experiences they have with their friends, connections and followers. A reciprocal process that helps better inform everyone about the marketplace and increases consumer 'solidarity'.

Twitter and Facebook have played a significant role in this. Imagine imagine them like a ticker tape. Not for stock prices -- but for everything. Where is the coolest new place to eat? Twitter. Which politician has said something stupid today? Facebook. Which celeb slept with their brother's wife? Twitter. It's all their, a constant flow of useful and trivial information shared between peers.

Nearly 90% of Millenials now use Facebook and as research shows 50% of consumers have made a purchase based on an online recommendation. And over 90% of people have been influenced by online word of mouth or recommendations from people they know.

In addition the social consumer can now engage with companies in an open way that they control. This means that businesses can no longer hide bad service. 30%-50% of social media users now use it for customer support or to engage with brands because it's quicker and they're more likely to get a decent response. Companies now know the potential reach of a complaint or review is infinitely greater than ever before. And this is breaking down the traditional structures of communication.

There are many wonderful examples of the power of social media. For example, regardless of your opinions on corporation tax, when it was revealed that Starbucks had paid very little in the UK they knew about it. Very quickly. Their #SpreadTheCheer hash tag was hijacked resulting in profanity laden Tweets appearing on big screens at the Natural History museum in London where they sponsored the ice rink.

And ultimately this helped lead to Starbucks making the unprecedented decision of paying more corporation tax. Something they were not obliged to do on any level -- legal or otherwise.

But its not all negative. Gate crash and viral marketing have allowed good and clever companies to connect with more customers and in far more innovative ways than ever before.

A tiny US company called Dollar Shave Club, which allows men to sign up up to a monthly razor subscription, released a cheap advert on YouTube. It was called, "Our Blades Are F***ing Great" the video was so amusing that it went viral and has now been viewed 14m times. One cannot imagine how much they would have had to pay an advertiser for the same reach.

Oreo also used social media to great effect during the 2012 super bowl. During the game the lights went out for 34 minutes. Oreo responded to this by posting an image on Twitter with the caption, "You can still dunk in the dark". It resulted in 15,000 retweets and 20,000 likes. For a company that didn't pay millions to advertise at the Super Bowl this was a great result.

Social media, is not only giving consumers more power. As was the case with Starbucks. It’s also forcing companies to engage with their customers in a more real and innovative manner as can be seen with Oreo.

To sum up. While we must accept that the development of the internet and the growth of social media has not occurred without problems. And will continue to raise challenges we must overcome. It has and is in many areas leading to positive change.

It is leading to significant challenges for the corporate incumbents and is forcing many to change and improve. But ultimately it has given the consumer a lot more choice and information and as a result power. Something that can only be a very good thing for our market economy.

This was the basis for my talk at the Six Twenty Club hosted by the wonderful Christian Michel.

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