The digital world has empowered today’s consumer to a great extent. From being passive recipients throughout history to active co-creators in the last decade or so, the consumer has come a long way. As the locus of power shifts from the company to the consumer, it is natural that companies will experience a loss of control over the 4P’s of marketing – Product, Price, Place and Promotion-which it has so zealously guarded so far. The power of digital is being unleashed in ways that were unimaginable even a few years ago. As with everything else, there is a positive and a negative side to the power of the digital environment. However, for the time being, let’s ignore the trolls of social media and disruptive hackers.
The product was always the preserve of the company, involving massive investments in factories. The consumer had very little direct say in it. Digital has changed that with co-creation of products and services becoming commonplace today. New product development was solely performed by a company. Not any more. From fast food chains to car companies to filmmakers, an increasing number of firms today are crowdsourcing product ideas. In-house product design teams might be in danger as product ideation becomes democratized. There are companies today that invite customers to ideate a product, design it and come to the factory to help build the product too! Product customization and customer engagement have gone deep.
Pricing strategies were perhaps the most closely guarded secret in any company. Trends today indicate that even this very sensitive decision-making area will also go the way of the product, customers will decide the price of a product or service in times to come. Though this sounds outlandish, Pay What You Want, maybe the way forward away from ‘equal prices for everybody’. Some companies are experimenting with this pricing method already. If the customer can co-create a product, why not allow her to decide the price which she is willing to pay for a product? Of course, for it to work, consumers must have differential preferences for the product or service in question.
The decision is tough as a company must recoup its costs and get a reasonable rate of return on investment. Is this possible if the pricing is left to the customer? Would it be too much power in the hands of customers and too much uncertainty for the company in terms of revenue flow? Probably not. Experiments need to be undertaken. Experiments such as setting a price floor, or creating price menus, organizing auctions, encouraging bidding, offering flex-pricing and focusing on negotiations. In the not so distant future, these may come into everyday play.
Promotion and communication between a company and consumers were probably the first to be affected by the digital wave. Every consumer began to have a voice. The monologue approach (company talking TO the consumer) quickly changed to the dialogue approach (company and consumer talking WITH each other). Word of Mouth transformed into Word of Mouse. Reach of every consumer expanded multi-fold. Good or bad news could be broadcast globally. It truly unleashed the power of the consumer across the board. Did the company survive this change? Most did. They realized consumer power needed to be harnessed rather than feared.
Finally, Placement (distribution) of products also changed drastically with the digital wave. Services could already be procured at a local level because of its intangible nature. Products were a different ball game. But revolutionary technologies such as 3D printing and micro-local delivery capabilities are changing the way consumers demand delivery. Consumers help other consumers create products using digital templates. National companies are collaborating with local vendors in your locality to deliver you flowers or groceries or medicines in real time – a beautiful collaboration between brick and click, what I call the ‘blick’ model of business.
In another situation, the role of distribution channels might have to be reassessed as digital goods get distributed rather than physical ones. It is just the beginning in many economies but as the cost of technology decreases, 3D printing your own products will become a widespread phenomenon and companies will fuss over your every need at your doorstep.
The relationship between the marketer and the consumer of this decade has changed drastically and needs a re-look with respect to the 4P’s. Companies have focused more on the Promotions ‘P’ and to some extent on the Product ‘P’. The other two, Placement and Pricing, offer bigger challenges that will be overcome as we move towards a hyper-engaged consumer society.