About The Consumer Cycle

When I was young my parents were unable to buy a television. To watch television we visited a friend of my father who had to work day and night to pay for this feature. At home we played games, listened to the radio and read books.

My parents always went to the same small shops around the corner. The owners knew my parents very well.

My parents had to pay attention to their financial budget all the time. To buy a television or another expensive product they had to save money for many years. When something broke down it was always repaired. People reused almost everything.

My parents did not have any idea about the outside world. The world ended at the border of my hometown (Leiden, The Netherlands). One week in a year we went to visit the brothers and the sister of my father in Gelderland about 60 kilometers away from Leiden. We went there by train. His brothers were farmers. They never went on a holiday. They had no idea how the countries outside the Netherlands looked like.

The consumer in the fifties (I was born in 1951) were what I call Balanced Consumers. The majority of the consumers had to reflect and to save money before they could buy a product. Products were constructed to stay alive for a long time. The counterpart of the balanced consumer was the isolated craftsman or the isolated local businessman. Most of the shops and the companies were one (wo)man shows. They were owned and operated by a family. The children were more or less forced to help their parents.

Suddenly the first supermarket appeared. It was created by a local entrepreneur. Soon he repeated the concept in many other towns. The supermarket was the next step in a scaling process that went up and up. The producers had to move the same way. Slowly they destroyed the “one man shows” in every area of society.

My uncles had to stop their “one wo(man)” farms because the local market stopped to function. The only way to survive was to get a contract from a meat-producer. In a short time the producer almost owned their farms and kept lowering the prices he wanted to pay. At the end my uncles had to stop farming.

The big supermarkets started to buy their products on a very large scale. In the first step they bought their products on a local level but soon they started to globalize. This stimulated international transport (boat and airplane).

What happened to the customer?

The customer changed from a human being into a concept. The marketing departments of the big companies designed classifications and the consumer was put into a classification. Companies started to specialize to produce for a special target group.

They also started to advertise. Customers started to standardize themselves. The artificial group constructed by the marketeers became a real-life group. The customers started to behave the way the marketeers predicted.

To keep the production-systems running the next innovation in marketing had to be constructed. The impulses of the customer were highly stimulated. The impulses are highly volatile. They react on trends and hypes. The needs of the customer started to fluctuate on a large scale. In the end the market became almost unpredictable. The only way to react was to scale up again, lower the costs of manual production, to automate and to standardize.

The impulsive customer is just one type of customer. They are the target of the producers. The impulsive customer is mostly young.

The creative, conservative, social and conscious customer are forgotten. They are mostly older. The social customers are group-oriented, cooperative and empathic. The creative customers are intelligent. They know how to buy almost everything for free. The conservative customers want to stay in the past. They don’t like impulse-marketing. The conscious customers know that the producers are wasting nature. The complement of the impulsive customer is a forgotten majority.

The producers try to create a very intelligent production/marketing-machine to sell old fashioned, creative, cheap, trendy, social, green products. This is almost impossible. The one-to-one shops, the craftsman and the old fashioned farmer are coming back. People stop to watch television and start to read a book or play a game. Radio is on its return. The economy is moving down. Inflation is speading up. People have to look at their budget again. The amount of customers that are buying second hand articles is increasing. The Balanced Customer is on its return.

We have moved full cycle.

About Smart Customer Networks or How Free Love will finally Kill the Big Companies

For many years I read the briefings of trendwatching.com. This month their trend is named Free Love. It is all about giving away products for free. They show that when you are smart you can get almost everything for free if you are able to cope with the advertisments.

The products are given away for free because somebody else is paying the costs or the consumer is paying for something else. The major trend is to give products for free because they are payed by advertisers.

You have to understand that this is a very dangerous trend. It is a dangerous trend because when you are an intelligent customer you are able to navigate through “free space” and get almost everything you want for free. The “free love”-trend is killing business in the end.

The funny thing is that companies are paying for their own destructing. They don’t see or don’t want to see that somewhere there is a global competitor who is selling their products for a price they are unable to offer without using the same model.

The most interesting part is that the advertisement that they are paying for is not speeding up their sales at all. It is speeding up the desire to get something that looks like what they are selling.

The desire also generates the need to produce new products. To stay in the rat race they have to innovate at an increasing speed to keep up with the market.

The only companies that are able to do this are global companies that are a global brand. A good example is Nike. They produce trendy products and their customers are paying a huge price for a product that is produced for a very low cost (in China). They even give their customers an opportinity to speed up the innovation process of Nike by designing new products.

Nike and other trendy producers aim at customers who are trend-followers. By creating a customer-lab they make use of customers that are trend-generaters. If they are able to connect the trend-generaters to the trend-followers they will stay in business.

If the trend-makers are able to connect to the trend-followers without the Nike-infrastructure Nike is out-of-business. You can see this trend already in software-development. It is called The Open Source movement.

The Open Source Movement give away software for free but let the customer pay for innovation. You only pay when you want something new and you want something new when you are accustomed to something old.

At this moment many customers don’t know how to mis-use the Free Love-trend. They are “stupid” or “lazy” but like every trend in the end the amount of “smart customers” will increase. In the end they will create Smart Customer Networks.

Smart customers become smart citizens when they want to use political pressure to accomplish something. They join or create pressure groups. When a smart customer gets sick he becomes a smart patient.

He searches the Internet to find the cause of his problems, joins a community of people with the same illness, asks an expert for advice and gives all the information he has gathered to his general practitioner or his medical specialist. There he negotiates his treatment. If he does not get the medicine he wants he is able to buy it somewhere on the Internet.

Most of the companies and government agencies cannot capture the smart consumer. He is navigating from vendor to vendor, from one pressure group to another, always looking for the best fit.

The needs of this kind of customer are constantly changing and expanding. Smart customers are not only buying services in the network, they are inventing, developing and selling their own products combining components from different vendors.

Smart customers can save a company and governments a lot of money. They take over the activities of high paid specialists. Vendors that understand this issue, cooperate with the customer in every stage of their processes.

They let them sell the product (through their personal network), make it possible to assemble their own combinations, give them information about the state of the process, help them to enhance their network and skills and let them even participate in the development of new products.

Not everybody has the time, the money, the facilities, the network or the capabilities to make optimal use of all the opportunities of the Internet. The number of smart consumers and the amount of smart customer networks is growing very rapidly. They are leading a new revolution that will change the marketplace and eventually every aspect of our culture.

The Industrial age is the age of mass production. The Taylor school of management dominated the organization of business. Taylor believed one should manage people (and customers) in the same way one manages inanimate assets and the machines on which people work. Mechanization and standardization of components and interfaces, careful supervision of quality standards, and minute division of labor characterize the mass production process itself.

The division of labor was accomplished by breaking down work into simple, repetitive tasks eliminating unnecessary motion and limiting the handling of different tools and parts. The consequent reduction in production time and the ability to replace craftsmen with lower-paid, unskilled workers or even robots resulted in lower production costs and a less expensive final product.

After the phase of mass production, the industry is now in the phase of mass customization. By carefully standardizing it is possible to make a distinction between components that customers like to vary (mostly visible) and parts that are part of the essential (invisible) infrastructure. A good example is the production line of Dell computers where customers can choose their own configuration.

A next step is to involve the customer in the design-process of the product (Customer Innovation). Companies like BMW or Audi give customers already access to innovation platforms where average drivers are invited to create the next generation of cars.

The move from Mass Production to Smart Customer Networks is the move from one united production and sales model aimed at the customer, to a network-model involving the customer in all stages. The challenge is to combine large-scale mass-production with small-scale user-involvement. It will be impossible to coordinate all the processes from one single point of control. Many coordinators have to synchronize their activities.

Manufacturers, retailers and customers have to act together in a collaboration network. Retailers and suppliers have to maintain customer relationships by sharing customers, margins, and intangibles like brand, as well as jointly planning marketing, merchandising, and sales activities and becoming more like companions (in a good marriage) than master and servant.

Mass Customization and Customer Innovation puts a high strain on the customer. The amount of choices a customer has to make is constantly increasing. The number of possible combinations of components that relate to a product and to a combination of components of different products will soon surpass the complexity a human being can handle. People simply do not have the time and the cognitive capacity to make all the choices that are needed. This problem can only be resolved when product-developers take the capabilities of the complete human cognition system into account.

Mass Customization and Customer Innovation give the customer a small stake in the business cycle. The customer is treated as a consumer and not as a co-producer. All the major design-decisions are still made by the executives in the corporation. In the future customers want to be treated on an even footing.

If customers really get frustrated, they can generate an enormous collective power. With this power, they can change the policies of a corporation (e.g. the Brent Spar affair of Shell) or even take over the complete business cycle.

A war between consumers united in Smart Customer Networks and the Big Corporations is not in the benefit of both the competitors. They have to cooperate and combine their expertise. The big problem is that organizations, supply chains and their supporting systems were never designed to be demand driven. The challenge is to find an evolutionary path where a new fully collaborative infrastructure cooperates with the existing legacy-systems and business-processes.