The Rise of the Infomediary

Our lives are getting busier everyday, longer working hours, longer commute time because of bad roads and traffic conditions. Lot of analysts have predicted a big boom in retail, however traffic and acute shortage of parking space impacts the overall shopping experience. At the same time we are having a huge choice of products and information overload about these products.

It is something that is becoming ever more valuable – our attention. No matter how powerful our technology becomes, it will never give us more than 24 hours within the day. As more and more options compete for our attention, this asset becomes even more valuable. How we as customers choose to allocate this scarce good will increasingly determine where and how value gets created.

“A study by retail-industry tracking firm NPD Group found that nearly half of those who described themselves as highly loyal to a brand were no longer loyal a year later . . .. Another remarkable study found that just 4 percent of consumers would be willing to stick with a brand if its competitors offered better value for the same price.”

In the first half of the 20th century, consistently high quality products were relatively scarce. Product brands prevailed. Over time, more and more products entered the market and shelf space became the scarce good. Power shifted to retailer brands. This has led to a broad-based shift in brand power from product brands to retailer brands. Retailers like Wal-Mart, Tesco, Best Buy, Home Depot, Nordstrom’s and CompUSA have been steadily amassing brand power at the expense of more traditional product brands.

In broad strokes, we are moving from product-centric brands to customer-centric brands. Product-centric brands represent promises about products (or retailers) – “buy this product from us because you can trust that it will be a quality product at good value.”

Customer-centric brands offer a radically different promise – “buy from us because we know and understand you as an individual customer and we can tailor an appropriate bundle of products and services to meet your individual needs better than anyone else.” In other words, customer-centric brands promise that, if you give them their attention, they will give you a better return on attention than anyone else.

Relatively few customer-centric brands exist today. In some cases, you might think of your personal physician, lawyer or accountant. In other cases, you might think of a local, independent retailer like a local kirana store, specialty music store or wine store that has taken the time to get to know you as an individual customer and recommends products to you each time you come into the store.

Niraj Dawar, a Professor of Marketing at the University of West Ontario, observes that the role of brands in aggregating customers is being undermined by information-rich markets where customer disaggregation becomes more profitable. He then cites two central facts of disaggregation: First, the locus of the consumer relationship is likely to shift away from product brands toward a trusted and credible umbrella brand. Second, as the consumer relationship shifts to the umbrella brand, tactical activities are implemented with targeted consumers or segments rather than at the brand level.

There will be two basic requirements for a customer centric brand. First, such brands ultimately require product agnosticism. If a company is really going to gain the trust of customers, it must be prepared to offer the products and services of other companies, even of competitors. This will create huge conflict between product managers and segment managers as you transition from a product brand to a customer centric brand. The second test is whether the company in fact focuses on building profiles of, and measuring performance with, individual customers.

What does this mean for Indian markets? The local kirana store will never go away if they change their approach to customers. They can service families by knowing exactly want they want and stocking up appropriately based on family data and their requirements. Today they stock and provide very good service in terms of immediate delivery and monthly payments. Most families repeat purchase 90% of the products and they have a variety of requirements from morning milk, fresh vegetables and fruits, milk products like cheese, ghee, ice cream and snacks. Most families also have requirements for wines, liquor and adjacencies like cocktail mixes, ice etc.

There is an opportunity to provide these kirana stores with software that allows store owners to build their customer profiles. The kirana store transforms from a mere stockist to an infomediary matching his customer requirement to the best products available. Customer centric services that will deliver family requirements with micro-warehouses in each locality.

If you agree or disagree, would really like to hear from you on this blog or email me at shrikant.patil@gmail.com

1 thought on “The Rise of the Infomediary”

  1. Complete Brand loyalty from consumers doesn’t really exist and brand mangers should not even bother striving for it. But Brand loyalty does exists in predefined bands. So there is price band under which consumers are brand loyal. Similar brand loyalty bands are packaging(volume of product) and packaging(look and feel). Example if x brand of soap is available between 15Rs to 25Rs i as a consumer will be loyal to that brand. If x brand of oil is available between a litre to 1.5 litres as a consumer i will be loyal. Anything out of these bands i can move brands.

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