Consumers have always wielded some level of power in the marketplace. If someone didn’t need a certain product, there wasn’t a lot you could do to convince him otherwise — besides begging, that is.
But nowadays, consumers who need a particular product realize that they’re not limited to your product. Thanks to technology, they have access to dozens of different options from dozens of different merchants at dozens of different price points, and these choices have shifted the power dynamic toward consumers.
And word-of-mouth marketing has tipped the scale even further. Of course, it has always played an important role, but now, the delivery method is more efficient. Within seconds, consumers can learn about a product and decide whether it’s worth the investment.
Trying to take control back from consumers isn’t an option — they’ve got a tight grip. Instead, you need to use their power to your advantage, and this can only happen when you use big data to get to know them.
Understand Consumers on a Personal Level
A consumer’s power boils down to his influence on other consumers. And as the business world enters the “consumer age,” it’s your job to gather information about him to drive your success. This reality speaks to how much power consumers really have. They get what they want when they want it. And because they get to pick and choose which companies they do business with, prices remain competitive.
Everything from used cars to airline tickets to digital cameras are priced competitively and discounted aggressively. To combat this, you must become best friends with data. The businesses that leverage data to understand consumers can steal market share from their competitors. Those that miss this opportunity, on the other hand, risk everything.
Think about it this way: If you aren’t collecting any data, you can’t offer the consumer any control. On the other hand, if you’re collecting data, centering that data collection on consumers, and giving them control, you can craft personalized messages that speak to your target audience.
Here are five ways you can use data to leverage consumer power:
1. Give consumers what they want. Your goal is to extract the consumer’s maximum willingness to pay, which requires delighting him with the right product at the right time. Big data ensures that you’re delivering on all accounts because it tells you exactly what the consumer wants and when he wants it.
2. Price the product appropriately. Data allows you to price products based on consumer preferences. It isn’t enough to provide the products consumers want. You need to provide them at the right price. You can use data to pinpoint the best price for your product.
Take Starbucks, for example. Last year, it raised coffee prices by 1 percent. While this increase seems insignificant, it actually increased profit margins by 11 percent. The trick is value-based pricing. Through customer analysis, the company was able to create targeted price increases that reflected the maximum price consumers were willing to pay. This way, the price increase wouldn’t alienate its customers.
3. Craft custom messages. The ability to better understand consumers allows you to tailor your messaging so it resonates with them at a higher level. In fact, 40 percent of consumers prefer doing business with companies that cater to their preferences. Use demographics and psychographics to craft personalized offers that will direct consumers to your products at the right time, at the right price point, and in the right channel.
4. Reduce your inventory. Manufacturers no longer need to carry huge inventories because cash registers can send signals back to the plant and optimize the production mix and timing. Efficient demand predictions and logistics also reduce inventories and wait times, making you much more responsive.
5. Engage with your advocates. Engaging the consumer as an active referral partner, support technician, and promoter is the key to leveraging his power. You can’t rely on passive word of mouth; instead, you have to actively encourage and foster engagement. You need to track who’s participating in the forums and turn them into brand advocates.
However, doing this involves more than offering a referral bonus or creating user forums — you have to recognize the work they’ve done. Creating or utilizing forums that facilitate user-to-user help allows you to engage with your promoters and track their interactions.
Your ability to understand consumers and target them with premium, tailored, convenient, and even high-priced products determines your market share. Once you’ve converted an average consumer into a loyal customer, he can become a brand advocate, allowing you to leverage his power to persuade other consumers to do business with you.
About the Author: Andy Barkett is the CTO for the Republican National Committee and the CEO of Getexp Inc. He is a managing partner at startup advisory firm Davis Innovators, which seeks promising ventures at early stages and offers a variety of services, from fundraising to talent planning. Andy has more than a decade of experience working in strategy and engineering at companies like Facebook, Livescribe, NVIDIA, and Google.