A modern myth debunked: no, consumers are not in control

Howard Gross / Founder and Principal, HG Communications, LLC; former Senior Director of Global Communications, The Nielsen Company / 2015-05-21

Certainly marketers no longer exercise the leverage they once did. But it is a delusion to assume it has been transferred to consumers; especially in an increasingly complex world where the very notion of control is, itself, becoming a myth.

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First we should pay attention to what they say. According to last summer’s Corporate Perception Indicator by U.S. cable television network CNBC and the public relations firm Burson Marsteller, better than 40 percent of the more than 25,000 international consumers queried think corporations have too much influence over their economic futures. In addition, 67 percent of those same respondents—and 66 percent of business executives—believe corporations sway public opinion far more than the public motivates corporations.

The concern is even more acute with respect to privacy, most notably in the United States, where a study by the Pew Research Center found that 91 percent of participants agree consumers have lost control over how companies collect and use their data.

Purchasing vs. subscribing
So why this disconnect between marketers and their intended audiences? One reason is that the former choose to characterize the relationship in terms of control; which implies they see it as adversarial. The dictionary defines control as “having power over someone”; and in an age when information is power, those who have it are loath to give it up.

For instance, when consumers buy digital books from Amazon or music from iTunes, they don’t actually own what they purchase. Rather, they acquire a license agreement that is basically a long-term lease – set forth under the Terms and Conditions – allowing the seller to revoke the privilege and remove the content at its discretion. Apple did essentially that, between 2007 and 2009, when it deleted songs on iPods that had been downloaded from services other than its own. After scanning the devices for items not bought through the iTunes Music Store, the firm required a factory reset, after which all music obtained from rivals inexplicably disappeared.

Companies such as Adobe and Microsoft have taken somewhat different tack by borrowing a page from content services like Netflix and replacing boxed-software with annual online subscriptions, so customers must re-up every year if they want to keep using their programs. There was a time when makers of books, music, and other works had little choice but to package their creations in physical form and sell them to buyers outright. Digital networks have changed that. Producers can now convert owners to perpetual users and extend the value of their intellectual property ad infinitum. Interestingly though, many of these same enterprises balk at any suggestion they pay consumers for the personal data they collect in the process.

More traditional companies too, have tried to enhance their jurisdictions. Last year, U.S. cereal giant General Mills issued a policy informing customers they gave up the right to sue the brand if they engaged in activities like joining its online community or signing up for its email newsletters. The corporation subsequently withdrew the mandate after considerable backlash, but that hasn’t stopped others from attempting to intimidate consumers.

Businesses such as hotels, dentists, and wedding photographers have begun burying non-disparagement clauses within contracts to prohibit customers from writing and posting negative reviews, even if they are entirely true. Southwest Airlines ejected a passenger and his children from a flight when he tweeted about a rude gate agent. It later allowed them back on board, but only after forcing him to delete the post.

To the extent consumers are aware of them, they find these practices offensive, to say the least. Scores of iPod users have filed an antitrust lawsuit that could cost Apple as much as a billion dollars. Moreover, the state of California has made it illegal for companies to retaliate against customers who voice their opinions. Which is why many organizations are taking a more benign approach, adopting the mantra of customer service in the hope that, in the words of the ParisTech Review, “a satisfied customer will naturally become, at virtually no cost, a commercial agent of unequaled efficiency.”

Albeit this may be true of the most passionate brand advocates, consumers as a whole are unlikely to buy into this type of an arrangement. Indeed, a survey by WPP agency Geometry Global has found that 40% of respondents from around the world say they see no point in even friending a brand online; while a majority of those questioned by the PR firm Edelman believe their relationships with companies are “one-sided,” with the latter interacting with them only out of “a desire to increase profits.”

Choice vs. control
Regardless, quality customer service does have merit, particularly when patrons have the advantage of taking their business elsewhere. This is often the case in markets where digital technologies have dismantled barriers of entry and new competitors can come from just about any place. Yet having alternatives is not the same as having control; and when choices are fewer and far between, there may be little need to curry favor with consumers.

Consider some of the businesses that reside at the bottom of the American Customer Satisfaction Index (ACSI). Among air carriers rated by the World Airline Awards, only one that is native to the U.S.—Delta—has landed in the top 50 (at number 49). The nation’s airlines, however, lead all others in terms of operating income and market value, despite subjecting fliers to more fees and less legroom.

For their part, Comcast and Time Warner Cable are the largest American cable television and Internet service providers, and the worst-rated. But they may still have a way to go before hitting bottom as they attempt to merge, since ACSI data show that such consolidation usually results in even lower customer satisfaction. That said, these companies, like airlines, operate in industries where size matters and the barriers remain fairly high; so there is limited downside to not pleasing users.

In light of these circumstances, by what other measure can marketers ascribe control to consumers? Not their technological prowess. Contrary to conventional wisdom,research over the years has shown that only a minority of people online go public with their opinions, whether negative or positive. And a meager one percent of them generate genuine engagement.

Recent headlines notwithstanding, consumers also lack the skills, means, or inclination to bend a company to their will as hackers did to Sony. The fact is, most still don’t truly comprehend how those little people get inside their television sets, let alone how companies track and exploit their personal information. In surveys dating back to 1999, Dr. Joseph Turow, a professor at the University of Pennsylvania’s Annenberg School of Communication has consistently found that the majority of Americans have little understanding of techniques like data mining or behavioral targeting, and are without the knowledge to adequately protect their privacy. Which may account for why the tool most often credited with empowering its users – social media – is the ACSI’s fourth lowest-scoring category; and Facebook specifically is the company most feared with respect to privacy.

Complexity vs. control
Granted marketers no longer exercise the leverage they once did, it is a delusion to assume it has been transferred to consumers; especially in an increasingly complex world where the very notion of control is, itself, becoming a myth. Complex systems are networks of many different elements that continually interact in unplanned and unpredictable ways. What is more, small or almost invisible occurrences can beget ever larger chains of unexpected events. Thus, as situations change so do outcomes; and both can be extremely difficult to command. Nowhere is this more evident than in today’s global digital marketplace.

For one thing, marketers are fond of referring to consumers in the form of what social scientists call “representative agents” – factitious persons or groups who typify the behavior of broad swaths of the populace. But as populations atomize into smaller self-defined segments whose interests simultaneously diverge and overlap, such generalities can be misleading.

In truth, there are significant differences among consumers worldwide. Those in North America and Europe, for example, mainly believe big business has too much control over their lives; whereas their counterparts across much of Asia think corporations exercise just the right amount influence. In developed nations, citizens also tend to bemore guarded about their privacy than residents of emerging markets.

But even within the same markets, consumers send mixed signals. According to global IT services firm EMC Corporation, people exhibit what it calls a “We Want It All” paradox. In its study of 15,000 participants in 15 countries, 91% of respondents say they value the benefit of “easier access to information and knowledge” that digital technology affords. Nevertheless, only 27% say they are willing to trade their privacy for the convenience of being online.

Juggling these disparities can be overwhelming, but complicating the issue further is an array of intricate technologies for which many marketers are ill-prepared.  As part of its report on the 2014 State of Digital Transformation, analyst firm Altimeter Group determined that 88 percent of companies surveyed had established a formal set of conversion procedures; though 42 percent were investing in their initiatives without really understanding what it is they plan to achieve.

For sundry businesses, the process starts with mastering “big data.” But to capitalize on this phenomenon they must extract and examine trillions upon trillions of bits of information created by people across multiple devices. Add to this the seemingly infinite output generated by the “Internet of Things”—billions of objects embedded with readable sensors—and the task is truly staggering as companies have to constantly update operating models just to keep pace. Furthermore, their cravings for vast amounts of data do not always jibe with their capacity to manage it.

In a survey last year by IBM, 70 percent of chief marketing officers admitted they were unprepared to handle the relentless surge of data. A more recent study by consulting firm Capgemini found that although 74 percent of covered organizations have managed to launch big data projects, just over a third of them describe these endeavors as “successful.” Only eight percent deem their efforts as “very successful.” Plus the more than 42 million security breaches over the past year raise serious questions about companies’ abilities to safeguard what information they gather.

Still, as overpowering as big data may appear to be, it pales in comparison to how much control marketers relinquish to the dominance of algorithms, and to those who can effectively manipulate them.

The power of algorithms
Algorithms are highly sophisticated sets of instructions for solving complex problems; and in a mere fraction of the time it takes humans to do so. In addition, they are capable of learning from their environments. So they can readily upend even the most meticulous marketing strategies. Google has proven this time and again by altering its search algorithms without warning, and sending numerous web site rankings into freefall.

Facebook too, has fiddled with its formulas. After years of urging brands to aggressively collect “likes,” it has substantially limited their ability to reach fans solely by means of organic marketing. Reducing the types and number of their posts that appear in users’ newsfeeds, the social network is coercing brands into buying ads instead.

Yet even when marketers manage to navigate these obstacles, they still come up against an onslaught of mathematically conceived fraudsters known as bots, which are designed to masquerade as online users. It is estimated that as much as half of all publisher traffic online is in the form of these automated applications; accounting for 11 percent of display ad views, and 23 percent video ads. This year alone they are expected to swindle businesses out of more than six billion dollars.

These and comparable challenges pose far greater threats to marketers’ authority than almost anything consumers can conjure up. Yet marketers can hand off some of the responsibility for tackling such matters to expert third parties like data scientists, mathematicians, physicists, and teams of lawyers and lobbyists. Consumers, on the other hand, must rely principally on legislators, the courts, and the occasional whistle blower to look after their interests.

In Europe, officials are drafting a new privacy directive slated for 2016, which will introduce extremely stringent rules on data collection that will apply throughout the European Union. Across the Atlantic, similar efforts have been more equivocal. Although consumer advocates mostly cheered the Federal Communications Commission’s new regulations for net neutrality, the White House’s proposedConsumer Privacy Bill of Rights Act has left many wanting more.

So no, despite what marketers might believe, consumers are not in control. They never have been and probably don’t want to be. It would take too much of their time and effort. What they more likely desire are simple, transparent interactions. The kind where they get what they pay for without having to fight or shill for what is rightfully theirs. Brands that are willing to abandon the meme and acknowledge this mindset will benefit by building relationships on the basis of something other than a myth.