Eric Friedman – Marketing.fm

Guest post from my friend Scott Sigel see more posts from Scott.

I wasn’t exactly a model student. There were a few occasions in high school and amidst my university days in DC when I might have evoked my inner Bueller and taken a day off. Although it’s certainly healthy to take the convertible for a spin now and again (“it is so choice”), for every class I missed I also forfeited the invaluable feedback of my professors and teachers. As a teenage mind can quickly learn, the more feedback one misses, the more one is doomed to repeat the same mistakes or simply not improve on what’s merely good which has the potential to be great. In the commercial world, the same rules apply; if a business doesn’t seek out feedback or ignores customer opinion of its products, it can repeat its failures, miss opportunity or simply remain stagnant while someone else listens in and builds a better mousetrap. The good news is that listening and talking to customers is easier (and cheaper) than ever.

Thanks to microscopic internet buzz, I got a few remarks regarding my recent piece on noise in the marketplace which was featured here on www.marketing.fm. One of the comments to the article noted the importance of integrity and quality in a business. While I agree that these are incredibly strong assets to an operation, they have not always been necessary components as verified by basic economics. Believe me, I don’t lobby against the value of these two characteristics in a business model; however it’s very clear that when the newest and hottest or absolutely essential product is released, a mass of early adopters will flock to it and drive demand. It doesn’t take a Keynesian scholar to realize that strong enough demand can, over a period, place a higher value on speed and quantity in lieu of integrity and quality. This is how we get, what I call, equilibrium lag. This once lengthy nuisance for the marketplace, both business and customer, is rapidly changing due to a whole new breed of consumer.

Firstly, equilibrium lag is the time difference between a product’s latent supply and demand before release and its ultimate equilibrium. Any product release or significant modification will contain a raw market-assumed supply and demand; the company assumes how much it will sell and the market assumes how much it requires. Since these assumptions will be inaccurate to some degree and demand will be over or under, this will cause an initial shift followed by further adjustments as the market corrects. The problem is the time necessary for a business/product to reach a natural equilibrium. If demand was low, the company needed to find out why and what went wrong with production/communication/distribution/etc. If demand was high, the company would need to communicate supply issues to its customers, find out what went right to replicate it and also minimize any potential for backlash/defects/shortcomings that could potentially hurl demand in the opposite direction. The point is that this all takes time. It can hinder the business’s ability to profit and innovate, as well as obstruct the best possible product from existing in the market.

Enter the new consumer. Over the past several years there has been a more than substantial change in customer behavior as buyers have taken on a far more proactive role in the market. While many retail sites such as amazon.com, have user reviews included at point of purchase, other sites such as consumerist.com take an almost militant approach to customer feedback. Social media sites have certainly become a part of the review matrix through associated applications, groups and posts. Facebook allows users to “become a fan” of a product, and hot new releases can instantly flood Twitter streams. Consumers have always talked, but now they’re heard and speak en masse. Nowadays, if a product is inferior, the market can and will speak back to the business through the countless means of feedback afforded by the internet, allowing the business (assuming it’s strategic and organized) to make immediate adjustments to their offering. In theory, and fast becoming practice, this all means a shorter equilibrium lag, faster time to profit and a better product.

My last piece emphasized that while customer to business communication is valuable, the sheer excess of buyer-to-buyer feedback across the web is one of the greatest sources of market insight available to a business. While the new consumer might be more demanding and more critical, they are also far more helpful than has ever been allowed on a global scale. The once seemingly aloof big-box retailer is now able to have customer relationships which can mimic the coveted warm and fuzzy rapport of small-town independent shops. With a more engaged marketplace, supply and demand adjust more quickly meaning reasonable pricing for a superior product; the key is in the conversation. Like I said, Ferris might have inspired me to take a day off once in a while, but be sure you don’t miss too much of that feedback, “…if you don’t stop and look around, you could miss it”.