Pires, Guilherme

Towards a Preliminary Model of Consumer Empowerment
Guilherme Pires, Newcastle Business School, University of Newcastle,
John Stanton, School of Marketing and International Business, University of Western Sydney,
Patricia Stanton, Newcastle Business School, University of Newcastle,
Abstract
Internet technologies have the potential to promote a power shift from sellers to buyers.
Consumers may be empowered because they are just ‘one click’ away from a plethora of global
competitors, all vying for their business. Because consumer empowerment may imply
switching suppliers in search of better value propositions, it checks competitive advantage
hence business cannot afford to ignore it. This paper develops a model of consumer
empowerment enabled through the growth of information and communication technology that
links the sources of consumer empowerment as an interactive process involving marketing
activity.
Introduction
Digital technology, particularly the Internet, has been described as a facilitator of a global
marketplace, characterised by “perfect information for all”, or at least, “equal access to
information about products, prices, and distribution” (Strauss and Frost, 2001: 157-63).
Combined with global connectivity generated by the widespread adoption of information and
communication technology (ICT), technological convergence in consumer markets underpins a
structural shift in business orientation towards price convergence (Hodkinson and Kiel, 1996).
In this situation, competitive advantage is likely to derive from marketing strategies refocussed
on consumers’ perceptions of value (ITGI, 2005), delivered through supplementary benefits
targeted to consumers. Many of supplementary benefits are ICT based (Faes et al. 2000; Slater,
1996).
The global reach of the Internet facilitates consumer access to more market information that
involves larger choice sets, consumer ability to exchange information and opinion with peers,
and the ability of consumers to change their own perceptions and consequent behaviour in a
rapid and unchecked manner. Since more knowledgeable consumers will feel more powerful
(Foucault 1977: 27), ‘customer empowerment’ reflects consumers’ enhanced ability to access,
understand and share information (Deshpande, 2002), and to complete transactions more
simply (Urban 2004). This realignment of competitive focus towards consumers’ valuations
pushes consumer-driven production processes, with potential implications for the power
relationship between consumers and suppliers. Hence, market knowledge that was once
controlled by business is being relinquished to consumers, who are increasingly empowered in
their decision-making (Wathiue et al. 2002). Since any business is unable to restrict consumers’
search processes and choices available by using ICT, business opportunities afforded by the
Internet come with a sting of unintended and largely uncontrolled consumer power. Hence, if
the growth of consumer empowerment is structural, relatively permanent and difficult to
control, then there are possible major implications for marketing strategies that focus on market
oriented organisational capabilities. This paper seeks to develop a model of consumer
empowerment enabled through the growth of ICT, a model that links the sources of consumer
empowerment, not as disparate forces, but as an interactive process that involves marketing
activity.
ANZMAC 2005 Conference: Strategic Marketing and Market Orientation
80
Empowerment: enablement with or without delegation
The term ‘empowerment’ has been traced to 1788 in the US Constitution, to convey the idea of
investing authority in a role or person, implying acceptance of personal responsibility or
accountability (Maccoby, 1999). Linked to the paradox of empowerment, whereby effective
empowerment means letting go and taking control (Baker, 1994), employee (internal customer)
empowerment means controlled delegation, involving clarification of the mandate and expected
performance (enablement) making available to the employee whatever means are required to
achieve particular performance. Transferring these concepts of empowerment to external
customers, consumer empowerment is about increasing value for consumers by providing
additional access, content, education and commerce to wherever they are located (Turnquist,
2004). It involves helping consumers choose what they want, when they want it, and on their
own terms (Wathiue et al. 2002). These descriptions imply empowerment as controlled
enablement, but they are very vague on what delegation is concerned. Examples include Polar
Air, which seeks “to meet its customers' needs while reducing the amount of stress placed on its
call center, as well as the costs related to handling calls” (Martin, 2001), a utility company
Puget Sound Energy (PSE), in the US, which empowers their energy consumers by disclosing
time-of-day pricing as well as providing more ways for consumer contact (Aspect, 2005); and
Victoria Electricity, in Australia, which offers an alternative dispute resolution procedure
designed to empower consumers ‘who may otherwise have had to simply accept supplier’s
decisions about their complaints’ (McLeod, 2002: 2). It is apparent that consumer
empowerment may entail more services being made available as well as consumer self-service,
but what consumers are allowed to do is clearly determined, regulated and controlled by the
supplier. Power remains on the supplier side.
Extent of ICT empowered consumers
The Internet transformed “information scarcity’ into ‘information democracy’ (Sawhney and
Kotler, 2001) or ‘transparency’ (Despande, 2002). Because empowerment derives substantially
from the knowledge derived from the Internet and from other sources, the extent of
empowerment will depend on consumers’ ability to discern useful information for evaluating
competing offers and to satisfy their needs with the least waste of time and effort. More
systematically, applied to the exchange process, the degree of consumer empowerment depends
on: [1] how ‘connected’ consumers are; [2] the extent of choice on offer (i.e. number and
quality of value propositions available); [3] consumer market knowledge (i.e. value
propositions the consumer knows of); [4] consumers’ ability to search for and gather new
market information; and [5] consumers’ ability to take advantage of alternative value
propositions (e.g. ability to assess what is on offer, economic, time and logistic constraints).
Empowered consumers manifest their power during the supplier selection process, either by
selecting one particular value proposition or by rejecting the offer and continuing their market
search. Previous use of consumer power (i.e. successful searches rewarded by value
propositions with better perceived quality) reduces a consumer’s willingness to compromise
and settle for propositions below their expectations. Hence, the significant difference that
consumer empowerment makes is based on higher perceived quality expectation thresholds
fuelled by consumer power; that is, power empowers. This effect is implicit in descriptions of
“new consumers” (Traulsen and Nerreslet, 2004) and of consumers becoming more demanding
(Koco, 2000) but the argument for a rising expectations threshold can be found in the work of
Parasuraman et al. (1991) and Zeithaml et al. (1993). Arguably, “if customers perceive that
ANZMAC 2005 Conference: Strategic Marketing and Market Orientation
81
they have alternative suppliers from which to choose, their zone of tolerance is likely to be
smaller than if they don’t feel they have this flexibility” (Parasuraman et al. 1991, p.43).
The more the power of the consumer, the more likely the rejection of value propositions of
unsatisfactory quality. Borrowing from the terminology used by Tehan’s (2003) assessment of
e-commerce retail purchases, a value proposition may involve particular amenities for the
consumer (e.g. convenience of shopping from home, more information on the service-product,
or lower prices) or deterrence (e.g. frustration at lengthy downloads, inability to examine an
item, or service deterioration). The greater the consumer’s exposure to the amenities, the
greater the demand for those amenities and the unwillingness to compromise for less, and the
more likely the decision to search further.
The spread of consumer empowerment may be inferred based on statistics of Internet users,
indicating a sustained growth of at least 30 million users per year, to a current level of 888.6
million as of March 2005 (SEO, 2005). This represents 13.9 per cent of the world population
(IWS, 2005), indicating substantial growth potential. In terms of revenue from sales, in North
America alone revenues were expected to surpass US$133 billion in 2005 (eMarketer, 2002).
Finally, the number of websites available has grown steadily from approximately 600 in 1993
to over 15 million by mid 2000 (Netcraft). These statistics indicate that an increase in the
number of Internet users prompts an increase in demand for service-products and in sales
revenue. Markets become more attractive for entrants leading to increases in the number of
available websites and value propositions. Competition intensifies when these new and
improved propositions compete with existing ones, increasing amenities and decreasing
deterrents, hence increasing consumer power, raising consumers’ quality expectations
thresholds and, ultimately, empowering consumers. While there are a lack of statistics
regarding the number of value propositions, the fact that Amazon, for example, used to sell
books but now offers a much more varied product selection (Tehan, 2003), suggests that
growth in this area must be substantial, fuelling consumer empowerment. Finally, the spread of
consumer empowerment can also be assessed by considering that the increasing numbers of
users indicates increased consumer ICT literacy. Because it is through the use of search engines
that Internet users find out about the websites that they purchase service-products from,
empowered consumers can be expected to increase demand for effective search engines, with
provider competition improving search engine effectiveness. More effective search engines
should enable greater consumer choice, hence greater consumer empowerment. Reportedly,
Google currently services as much as 76 per cent of web searches, but competition for the
patronage of web searchers is increasing (SEO, 2005). Consequently, consumer empowerment
is also likely to increase.
Overall, the potential growth of the Internet is tied to an increase in the number of consumers
and suppliers, increasing demand and supply as well as the quality of search engines available
to both. Because of network synergies, connectivity expands further. The increase in supply
increases competition and the stock of value propositions available to consumers. Greater
choice and better means to choose, fuels the demand increase. Because electronic networks are
characterised by intense connectivity and are amenable to the development of online consumer
networks, the degree of consumer empowerment of an individual consumer may also increase.
Online consumer networks allow consumers to share information about suppliers and their
value propositions with other consumers, thus reducing consumer dependence on suppliers’
communications to form their own expectations about quality. In certain cases, consumers may
gain countervailing power by forming collective buying groups, able to negotiate better terms
with suppliers (Hirschey and Pappas, 1993). These forces may push expected quality thresholds
ANZMAC 2005 Conference: Strategic Marketing and Market Orientation
82
even higher. However, the more demanding consumers become, the more their uniqueness may
prevail with preferences for value propositions that more closely match this uniqueness. This is
the rationale for the argument that, rather than forming a global market, the Internet is giving
way to consumer market fragmentation (Yancey 2000; Turnquist 2004). But fragmentation
need not imply less empowered consumers. It creates the opportunity for suppliers to devise
customised and/or personalised marketing strategies that heighten consumers’ selective
perceptions, leading to a preference towards the supplier. Competitive advantage may be as
sustainable as this preferred status. Hence, ‘becoming the preferred supplier is the goal’
(Deshpande, 2002: 228) and power is on the side of empowered consumers.
Strategic approaches to consumer empowerment
Business has been using more consumer-centric (-empowerment) marketing strategies (ITGI
2005). Responsiveness to changing consumer needs may explain Seven Eleven becoming
‘Always Open’, or banking changing from 'you come to us, on your time' to limited capability
at an ATM at any time, to 'access any of our services 24/7, by phone or Internet'. Other
examples include the Citizens Charters (IDS 2005), introduced in the UK public sector to
empower customers by creating a mechanism for their complaints about maladministration and
providing comparative performance information relative to other providers; the Ritz-Carlton
Hotels’ customer focused empowerment, which asks staff to be responsible for, and act upon,
customer complaints (Mosely 2005); and the ‘Ask once, promise’ marketing communications
recently introduced to Australian banking, whereby the bank employee that is first approached
by a customer with an inquiry, ‘owns’ the inquiry for the duration of the transaction, saving
customers from the need to repeat their requirements to any other bank employees.
Consumer-centric marketing strategies also are often associated with customer relationship
management (CRM) advocacy. Consumer-centricity, however, depends on whether the wants
at their core are determined by customers’ actual wants or by managers’ perception of what
they ought to be. Disregard for this condition arguably justifies that many marketers fail to
realize that ‘a lot of the benefits that are claimed for CRM are really benefits that accrue to the
enterprise, but have nothing to do with the customer” (Newell 2003). Provided suppliers
‘know’ their customers, consumer market fragmentation allows for yield management of the
market, encouraging consumer empowering, personalised strategies that combine greater
customer control over operations including what is done where, to whom and how. However,
businesses apparently understand their increasing attention to consumer wants as controlled
strategic concessions given to consumers due to increasing competition, as illustrated by
current approaches to customer self-service (CSS) and CRM. The idea of CSS is that
consumers should be, and feel they are, in charge of their experience, while suppliers benefit
from reduced operational costs. However, the question is whether consumers have their say in
regard to CSS, or whether unwanted CSS is imposed upon them. Misunderstanding of the
customer has been shown to have led some banks in Australia to develop services (such as
ATMs) that some of their customers do not want (Rugimbana and Iversen 1994). The notion
that consumers will be grateful to suppliers for the power they enjoy from CSS (BusinessTown
2005), contrasts with the view that empowering involves not forcing consumers to do anything
they are unwilling to do (Greenberg 2001).
ANZMAC 2005 Conference: Strategic Marketing and Market Orientation
83
Towards a model of consumer empowerment generation
The factors, discussed in this paper as leading to a change in the relationship between
consumers and suppliers and a growing unintended consumer empowerment, are drawn
together as a preliminary model, depicted as figure 1 below.
Figure 1: Preliminary Model of Consumer Empowerment Generation
Consumer ability
to search and
gather new info
Consumer past
choice experiences
Quality of Value
Propositions in the
market
Number of Value
Propositions in the
market
Consumer
market
knowledge
Consumer
Choice
Consumer-centric marketing strategies
(CSS; CMR, employee empowerment, ..)
Customisation
Personalisation
Responsiveness
Consumer
Empowerment
Countervailling
Power
Contextual Constraints (Assessment; Access; Economic; Logistics; Time; Product; Transaction complexity)
Consumer empowerment is presented as both a structural condition (reflected in the
technologies and access to that technology) and a psychological condition in which
consumers perceive receding constraints in their search for value. The role of marketing
strategies in engendering growing, controlled consumer empowerment is presented on the
right hand side by the consumer–centric marketing strategies that seek to enable and also
control delegation. In addition to the dependence on ICT familiarity and use, such strategies
feed into increased supply as well as consumer ability to search and gather new information,
emphasising the uncontrolled nature of consumer empowerment. While the model presents
the factors contributing to the changing consumer empowerment process, clearly more
amplification of the linkages is required.
Implications
Consumer empowerment in its current form is in its infancy. Combining ICT with CSS and
enhanced consumer empowerment could lead to the development of virtual corporations only
staffed by customers. While this is an unlikely scenario, it provides a portent for a future where
enhanced relationships with consumers substitute for managerial prescriptions of consumer
behaviour. The emphasis, however, may be not on traditional CRM approaches but on CMR,
the customer management of relationships (Newell 2003). Overall, the literature paints a
complex picture of consumer empowerment and its impact on marketing strategy. Common
threads in this literature emphasise business intelligence and consumer management based on
their value to the business. Preferred consumers receive full attention and businesses make
every effort to satisfy even the least of their desires. These preferred consumers are empowered
by their ability to pay for the extraordinary service. Non-preferred consumers are allowed
(directed) to serve themselves, more or less effectively, usually on a restricted and highly
controlled range of transactions. Consumer empowerment in both these cases is enablement
without delegation. Nevertheless, there is also evidence in the literature that consumer
empowerment may ensue from business endeavours to take advantage of e-commerce
opportunities. While power is not deliberately delegated to consumers, control of consumer
ANZMAC 2005 Conference: Strategic Marketing and Market Orientation
84
choice appears to be beyond any one business. This paper supports a view of consumer
empowerment as an important and enduring structural change in the business environment.
Since consumers may switch suppliers in search of better value propositions, consumer
empowerment checks competitive advantage and business cannot afford to ignore it. This
amply justifies a need for further research.
ANZMAC 2005 Conference: Strategic Marketing and Market Orientation
85
References
Aspect (2005), “Puget Sound Energy, Inc.: Empowering customers with more contact choices”,
(http://www.aspect.com/customers/storyview.cfm?story_id=4 accessed 20 May 2005).
Baker, W. (1994) The Paradox of Empowerment, Chief Executive, Vol 93, pp: 62-65 (accessed
15 May 2005. (http://www.humaxnetworks.com/Print/p-paradoxarticle.html).
BusinessTown.com (2005), “New Rules of E-Commerce”, (accessed 5 May 2005,
http://www.businesstown.com/internet/ecomm-rules.asp).
Deshpande, R. (2002). “Performance Companies”, International Journal of Medical Marketing,
Vol 2 No 3, pp. 225-232.
eMarketer (2002), “U.S. B2C E-Commerce Tops $90B This Year”, Press Release, May 1,
(available at http://www.emarketer.com/news/article.php?1002209).
Faes, W., Matthyssens, P. and Vandenbempt, K. (2000) “The Pursuit Of Global Purchasing
Synergy”, Industrial Marketing Management, Vol 29, pp. 539-553.
Foucault, M. (1972), The Archaeology of Knowledge, Tavistock Publications, London.
Greenberg, P. (2001), CRM at the Speed of Light: Capturing and Keeping Customers in
Internet Real Time, McGraw-Hill.
Hirschey, M. and Pappas, J. (1993), Managerial Economics, Harcourt Bruce & Company, The
Dryden Press, Orlando.
Hodkinson, C. and Keil, G. (1996) “Electronic Interactivity In The Australian Marketplace:
Some Observations, Issues And Predictions”, Asia Pacific Advances in Consumer Research,
Vol 2, pp. 116-127.
IDS - Institute of Development Studies (2005), “Bringing Citizen Voice and Client Focus into
Service Delivery”, in a. Coote (Ed.) The Welfare of Citizens: Developing New Social Rights,
University of Sussex, Brighton.
ITGI - IT Governance Institute (2005), Governance of the Extended Enterprise: Bridging
Business and IT Strategies, Wiley.
IWS - Internet World Statistics (2005), World Internet Users and Population Stats, (accessed 20
May 2005 (http://www.internetworldstats.com/stats.htm).
Kelly, K. (1998). New Rules for the New Economy, Viking Penguin, New York.
Koco, L. (2000) “Service Bar to Rise in Next Decade”, National Underwriter, Vol 104 No 19,
May 8, pp.27-28.
ANZMAC 2005 Conference: Strategic Marketing and Market Orientation
86
Maccoby, M. (1999) “ReThinking Empowerment”, Research Technology Management, Vol 42
No 4, Sep.-Oct. (accessed 15 May 2005,
http://www.maccoby.com/Articles/ReThinkingEmpowerment.html).
Martin, J. (2001) Customer Empowerment Takes Wing, (accessed 15 May 2005
www.unisys.com/execmag/industries/internal/travel__and__transportation/2001_10_atwork.ht
m).
McLeod, F (2002), “Customer Empowerment: The Future of Water Dispute Management”, In
Proceedings of the 7th Annual National Water Conference, September, Melbourne.
Mosely, T. (2005) “Customer Focused Empowerment Pays at Ritz-Carlton”, (accessed 1 June
2005 at http://www.serviceexcellence.co.uk/ritz.shtm ).
“Netcraft” accessed May 5, 2005 in
http://www.jhemans.powerup.com.au/Internet_Statistics/interner_usage_statistics.htm
Newell, F. (2003) “Why CRM Doesn't Work: How to Win by Letting Customers Manage the
Relationship”, CRM Magazine, May, Bloomberg Press (accessed 15 May 2005,
www.destinationcrm.com/articles/default.asp?ArticleID=3107).
Parasuraman, A., Berry, L., Zeithaml, V. (1991) “Understanding Customer Expectations of
Service”, Sloan Management Review, Vol 32 No 3, pp. 39-48.
Reis, D., Pena L. and Novicevic, M. (2002) “Widening Quality Gap: A Historical
Interpretation”, Total Quality Management, Vol 13 No 3, pp. 365-371.
Rugimbana, R. and Iversen, P. (1994) “Perceived Attributes of ATMs and Their Marketing
Implications”, The International Journal of Bank Marketing, Vol 12 No 2, pp. 30-35.
Sawhney, M. and Kotler, P. (2001), “Marketing in the age of information democracy”, in
Iacobucci, D., Kellogg on Marketing, Wiley, NY, pp. 386-409.
SEO Technologies (2005), “Internet Usage Statistics”, (accessed 20 May 2005,
http://www.jhemans.powerup.com.au/Internet_Statistics/internet_usage_statistics.htm).
Slater, S. (1996) “The Challenge Of Sustaining Competitive Advantage”, Industrial Marketing
Management, Vol 25, pp. 79-86.
Strauss, J. and Frost, R. (2001), E-Marketing, Prentice-Hall, New Jersey,
Tehan, R. (2003), “E-Commerce Statistics: Explanation and Sources”, Report for Congress,
Congressional Research Service, The Library of Congress.
Traulsen, J., Noerreslet, M. (2004) “The New Consumer of Medicine - the Pharmacy
Technicians’ Perspective”, Pharmacy World & Science, Vol 26 No 4, August, p. 203.
Turnquist, C. (2004) “VP Value Chain Services, Syntegra and Stan Elbaum, VP”, Strategic
Solutions, Aberdeen, (accessed 15 May 2005
www.retailsystems.com/index.cfm?PageName=PublicationsTONArticle&ArticleId=3594)
ANZMAC 2005 Conference: Strategic Marketing and Market Orientation
87
Urban, G. (2004), Digital Marketing Strategy, Prentice Hall, NJ.
Yancey, D. (2000) “Economies of (Small) Scale”. IbizStrategist Newsletter, December 1
(inaugural issue). (http://www.ibizstrategist.com/strat120100.htm accessed 15 May 2005).
Wathieu, L., Brenner, L., Carmon, Z., Chattopadhyay, A., Wertenbroch, K., Drolet, A.,
Gourville, J., Muthukrishnan, A., Novemsky, N., Rather, R. and Wu, G. (2002) “Consumer
Control and Empowerment: A Primer”, Marketing Letters, Vol 13 No 3, pp. 297-305.
Zeithaml, V., Berry, L., Parasuraman, A. (1993) “The Nature of the Determinants of
Customer Expectations of Service”, Journal of the Academy of Marketing Science, Vol 21 No
1. pp. 1-12.
ANZMAC 2005 Conference: Strategic Marketing and Market Orientation
88