Eric K. Clemons
According to Cutter Consortium Fellow, Professor Eric K. Clemons of The Wharton School at University of Pennsylvania, "Chris Anderson describes The Long Tail in online retailing, without really explaining why consumer behavior has changed or how to apply long tail strategies to perishable goods or more general categories of offerings. Silverstein and Fiske describe Trading Up to luxury goods, again without examining the causes for change in consumer behavior. A more complete explanation of consumer behavior is based on informedness and pursuit of products that truly meet individual wants and needs, cravings and longings. The consumers' pursuit of products is better for them. It is not trading up, but trading out."
In his opening statement as Guest Editor of a recent Cutter IT Journal issue on "The Long Tail: The Changing Role of Strategy, Systems, and Operations in the Era of the Informed Customer," Clemons identified three trends that are most critical to the changes in marketing strategies that he's observed in the course of his research:
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Hyperdifferentiation: With today's complex management technologies, we can produce and sell almost any combination of goods and services.
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Resonance Marketing: When the customer knows what is available and finds what he truly wants, he willingly pays for it. Not every form of differentiation is cost-effective for every consumer, simply because not every consumer will value it or pay for it. Resonance marketing guides differentiation and focuses it, customer-by-customer and service-by-service, on creating value and using this value to create revenue opportunities.
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Informedness: The change in information available to consumers is so profound that it requires this new word. Consumers know what products and services are available in the marketplace, where to find them, the products' precise attributes, and what the products will cost. Informed customers are unwilling to pay very much for things that are not precisely what they want. But they are willing to pay premium prices for what they truly want.
The three forces that explain the changes in consumer behavior are:
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The competition discount is up: If an offering is a commodity, then head-to-head competition among producers or vendors and nearly perfect information in the hands of consumers results in the competition discount, reducing the prices that consumers pay.
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The compromise discount is up: If the offering is a less than perfect fit with the customer's preferences, then the compromise discount comes into play, once again reducing what truly informed customers are willing to pay. For products that are unique, and that offer a nearly perfect match with a customer's wants and needs, cravings and longings, neither competition nor compromise discount exist, and the customer's willingness to pay is much higher.
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The uncertainty discount is virtually eliminated: The truly informed customer is willing to pay a premium price even for unfamiliar products that represent a perfect match; with perfect information the uncertainty discount associated with unfamiliar offerings is reduced.
"These simple changes in consumer behavior will alter all of the 4 Ps of corporate marketing strategy, from product design and pricing to promotion and physical distribution. Because we know why we have to change, we also know how we have to change."
Clemons concludes his statement with this point: "Executives must remind themselves that these forces change every aspect of corporate strategy, which will in turn transform their professional lives. You will change the way you approach your job because (a) you have to; (b) you want to; and (c) you can. Likewise, every firm will have to change in order to exploit sweet spot opportunities, every firm will want to, and every firm can."
To request a copy of Vol. 20, No. 4 Cutter IT Journal, containing Eric Clemons' opening statement "Resonance Marketing in the Age of the Truly Informed Consumer" or to schedule an interview with Cutter Consortium Fellow Eric Clemons, contact Ron Pulicari (+1 781 641 5114 or rpulicari@cutter.com).
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