The Soul of the New Consumer

Chapter One

What Is a Soul, Who Are

These Consumers, and

What Makes Them New?

Being a child of the Bible Belt, I have had many encounters with the word "soul." The well-worn noun packed an intimidating, if not awesome, punch that was the by-product of my weekly experience with fire-and-brimstone sermons at the Southern Baptist church. I remember in those days of my childhood being preoccupied with the word "soul," wondering what it really meant and where it was actually located. Was a soul a vital organ, like your heart, your brain, or your pancreas? Was your soul what ascended from your body when you died? What do souls look like? How can you be sure you have one? How do you know if you have a good or a bad soul? These are the types of questions that soul-saving practitioners evoked in a curious child.

The term "soul," in the context of this book, isn't nearly as puzzling or arcane as it was for me back then, although it does share some common properties. In this frame of reference, soul means the essence of an individual; what makes him or her act; the emotional and motivational parts of a person that cause him or her to be unique. The soul is the animating principle--the bundle of feelings, thoughts, and actions that drive all human beings.

What is a new consumer? According to Webster's dictionary, a consumer is a person or an organization that consumes--spends, absorbs, devours--commodities and services. The act of consuming is as old as time itself. There have been consumers on this planet for thousands of years. What is new about "the new consumer?" The new consumer uses the Internet to facilitate the consumption process: identifying needs, searching for solutions, buying products and services, answering questions, and resolving problems. Many "old" consumers have become new consumers and, in doing so, have transformed into more powerful beings. The new consumer has easy access to countless information sources, innumerable products and services, and greatly extended communities. This has put the new consumer in an unprecedented position of control. The new consumer knows more, has more choices, and can act with fewer logistical constraints than ever before.

So, what makes new consumers "new" is that they are empowered by the Internet. While they live among other seemingly similar consumers who crowd the busy highways, stand in lines at theaters, and push around grocery carts in supermarkets, when they are on the Internet, they are different from their unwired peers. They have been transformed. They have different attitudes. They behave differently. And they have a set of preferences that has been shaped by the empowering qualities of the Internet.

There is an additional dimension to the definition of consumer. For the purposes of this book, our consulting firm, Cognitiative, Inc., defines the new consumer as a shopper who is acting on behalf of his or her personal , rather than professional, needs. While we present our perspectives on business e-customers in chapter 7, the primary focus of Cognitiative's research and analysis for this book is the online consumer--the average citizen, the next-door neighbor, the person on the street. And we focus on her as a shopper--as a spender of money.

In this book we explore the souls of the new consumers; we study the attitudes, behaviors, and preferences of these brave new souls. We analyze the psychodynamics of the buyer and seller relationship. We get into their heads. We listen to their voices. We learn what attracts them, what repels them and what makes them loyal. We discover what makes them tick.

Acceptance of the Internet

It is interesting to contemplate how quickly the United States population has adopted the Internet. The rapidity of Web acceptance has truly been remarkable. Historically, the United States has been a country in which new technologies are assimilated fairly rapidly, given the prevailing economic constraints and manufacturing realities of the time. For example, by 1954, a mere seven years after the introduction of television, 55 percent of American households had a television set. This was considered very rapid acceptance, especially because of the relatively high prices of TVs at that time and the nascent quality of broadcast program content. However, the Internet and the Web are breaking those records. The Internet reached as many Americans in the first six years as the telephone did in its first four decades. Every day, Web access is becoming available to a growing percentage of the United States population.

RESPONSE TO CHANGE

Despite the rapid embrace of new technologies by Americans, there continue to be anxieties stimulated by change. For example, there were many concerns among human behavior theorists during the early years of television about the potential negative effects of the media. And similar anxieties were voiced about earlier modes of communications as well. In their article "Historical Trends in Research on Children and the Media: 1900-1960," Ellen Wartella and Byron Reeves document the apprehensions raised with each introduction of new media throughout the twentieth century. They point out that predictably, there were alarms sounded soon after the advent of every new media concept--reaching as far back as dime novels, and spanning the introduction of movies, radio, comics. and television. They observe that "whenever there is a new social invention, there is a feeling of strangeness and a distrust of the new until it becomes familiar."

True to form, today's researchers and social critics are debating whether the Internet is improving or harming participation in community life and social relationships. It is a subject of extensive academic research. As stated in the article "Internet Paradox" by Robert Kraut and Vicki Lundmark, "Some scholars argue that the Internet is causing people to become socially isolated and cut off from genuine social relationships, as they hunker alone over their terminals or communicate with anonymous strangers through a socially impoverished medium. Others argue that the Internet leads to more and better social relationships by freeing people from the constraints of geography or isolation brought on by stigma, illness, or schedule."

A recent study by Stanford University's Institute for the Quantitative Study of Society provides further validation for concerns about technology-driven isolation in our society. They found that as Internet use grows, Americans spend less time with friends and family and more time working for their employers at home. In fact, the study observes that "the more hours people use the Internet, the less time they spend with real human beings," thus continuing the trend of isolation due to technology.

Other editorialists have entered the fray with concerns about Internet security, consumer privacy, and objectionable content distributed via the Internet. The security breaches that blasted onto the e-business scene in early 2000 contributed significant fuel to an already healthy bonfire of paranoia. Awareness was raised among businesses and consumers that online security must be shored up to avoid potential system-wide disaster. In addition, the ongoing debate about online privacy has stimulated many consumers and activist groups to advocate better business practices and potential government intervention to ensure consumers' rights to privacy. At the same time, government, businesses, and consumers struggle to find solutions for filtering Web-delivered content to protect the innocent without violating the right to freedom of speech.

Indeed, the Internet has wrought great change and the ripple effects are significant. The argument about its impact will continue for many years to come and there will never be a conclusive answer. The population is too diverse and the Internet is too versatile to reduce the relationship between humans and the Web to a rhetorical argument of good versus evil.

So it is to be expected that we have heard from alarmists as well as from enthusiasts regarding the Internet. Human reaction to change hasn't evolved much over the past one hundred years. Despite anxieties that some people may have about the Internet and the multiple ways it may be used and abused, the American public has positive attitudes about it. According to research published in Understanding , consumers give high scores to the value of e-mail and the Internet in improving the quality of life in America: 71 percent indicated that e-mail had made the quality of life better, and 69 percent said that the Internet had made the quality of life better--a very high level of endorsement for such a fledgling innovation.

THE WEB EFFECT

A notable attitudinal tendency that we have observed in our research with new consumers is something we call the Web Effect: Once consumers gain access to the Web, they quickly adapt to it and, in very rapid order, perceive the Web as familiar ground. This is a concept we introduced in our first book, Dead Ahead: The Web Dilemma and the New Rules of Business .

As shown in figure 1.1, the Web Effect unfolds in the following sequence. Access leads to preference. Preferences become demands. Demands guide selection criteria. Selection criteria first include minimum requirements. Once the minimum requirements are met, then the most important criteria become the characteristics that differentiate the chosen solution from the rest. Businesses who target new consumers must recognize the rapid pace at which the Web Effect materializes. Not offering an online alternative as a way of conducting relationships with new consumers will result in being dismissed from consideration. But, offering a Web alternative is not a differentiator among these consumers. It's simply a price of entry. As more consumers integrate the Web into their daffy lives, the Web Effect becomes a critically important force for businesses to reckon with because ultimately, the only set of alternatives consumers will consider in their consumption decisions will be Web-based.

Necessary Precursors to the Acceptance of the Web

The Web Effect didn't just happen overnight. There were necessary behavioral shifts that served as precursors, preparing society in the late twentieth century for the Internet. Of course there were myriad technical developments that were prerequisites to the existence of the Internet and the Web as well. But here we are discussing the behavioral shifts in the consumer population that paved the way for the acceptance of the Web.

THE DE-PERSONALIZATION OF RETAILING

One of the key factors that facilitated the acceptance of the Web was the de-personalization of retailing, a gradual process that took years to unfold. Many economic and cultural factors caused these waves of change to occur. Retailing, as an industry, evolved in the second half of the twentieth century from primarily small, independently owned businesses to an industry dominated by much bigger corporations. This shift from "mom and pop" merchants to larger enterprises created a different shopping environment for consumers. Small specialty stores where merchants knew their customers by name were replaced by department stores that offered a wider array of products but less personal services. Suburban malls replaced downtown shopping communities as cities geographically expanded. Department stores were threatened by discount department stores that offered less service and little ambiance, but lower prices.

Parallel to these developments was the growth of the direct-mail catalog industry. The first catalogs were introduced in the late 1800s to provide consumers in remote locations with access to goods and services. The catalog industry experienced a significant spurt in the late 1900s as catalogs multiplied and the range of products offered through these vehicles expanded. Catalogs were the essence of impersonal shopping. In the early days, orders were placed and fulfilled through the U.S. mail. No direct human contact was made at all. While catalog shopping became somewhat more personal when telephone call centers began to be used for order taking, the person on the retailer end of the telephone connection was still a faceless stranger.

All told, many of the evolutionary changes in retail were for the better, in terms of consumers having more convenient access to better and cheaper goods and services. Because of this evolutionary process, however, the retailing experience has become less personal. Merchants no longer recognize their customers. Consumers aren't even sure who owns the stores they patronize. But it doesn't seem to matter--at least not enough to regress to the way things used to be. In the spirit of progress, there has been a steady march toward the alienation of customers in the retail channel and consumers have come to accept it. In fact, consumers' demands for more choice, lower prices, and greater convenience have been the catalysts for these changes.

Of course, real humans staff today's retail storefronts, and, in some cases, these retail personnel offer customer service. But more typically, the human serves the primary purpose of operating the retail machinery--the cash register, the bar code reader, and the credit card verification device. The value-add of humans in the retail environment is negligible, and so we consumers have become accustomed to not expecting or needing other humans to assist us in the purchase process, at least for many types of products. Once consumers make that transition to being more autonomous shoppers, the move to shopping online is a small leap.

Some people might consider this de-personalization of retail to be a bad thing; Others may think it's a good thing. We are not here to cast judgment or to mourn the good old days. Our key point is that the steady move toward de-personalizing the consumer shopping experience in retail outlets was a necessary precursor to the acceptance of the Web as a consumer commerce vehicle. Consumers had to reach a point where they were comfortable with relying on themselves and technology to successfully locate and purchase the goods they needed.

TIME DEPRIVATION OF CONSUMERS

Another key prevailing condition that has made the consumer market ready for the Internet is the ever-increasing time demands in our lives. On a daily basis, consumers face a set of responsibilities and tasks that are often too multitudinous to accomplish during waking hours. This trend toward overcommitment began in the last three decades of the twentieth century, and was stimulated by both economic and cultural changes.

From an economic perspective, many households transformed from single- to dual-income homes because of the increased cost of living. Families needed the paychecks of multiple wage earners to get by financially. This resulted in more household income, but it also created a time deprivation dilemma that had not existed previously. Households no longer had the luxury of full-time homemakers managing daily-life routines, as these individuals were pressed into the workforce. Time for conducting the more mundane aspects of life, such as grocery shopping, clothing care, and home improvements evaporated. Time deprivation impacted everyone in the household, as life-maintenance tasks were spread among all members of the family. The result--everyone had less time.

Today, the situation has continued to become more intense. Commonly accepted workplace practices pressure workers to put in more hours. More dense urban and suburban populations create more highway and transit-system traffic, which makes for longer commute times. We as consumers are literally running out of time.

Another cultural shift has contributed to the time deprivation situation. The trend of women joining the workforce was not only economically driven, it was psychologically driven as well. The women's liberation movement of the 1960s and '70s created a cultural environment where women were challenged to develop careers. Many young women began to consider staying at home or taking up mundane nine-to-five-type jobs unacceptable. Therefore, women were going into the workforce not only for economic reasons, but for personal-development reasons as well. Women became more career oriented rather than job oriented, which resulted in longer working hours, more business travel, and more arduous intellectual challenges for professional women. All of these factors resulted in women having less time to manage their lives and the households for which they were responsible.

This megachange has many sociological implications for our lifestyles. From a consumer behavior perspective, the changing landscape has created a significant need for the activities of daily living to be more efficiently performed. Consumers need systems, services, products, and modes of living that save time and provide convenience. This environment of widespread time starvation among consumers has been a very important precursor to the acceptance of the Web.

THE ACCEPTANCE OF CREDIT CARDS

Pragmatically, one of the reasons for the rapid success of e-commerce in the United States is that we have a currency--a method of financial exchange--that works very well in an online environment: the credit card. Without the widespread consumer adoption of credit cards, the Web as a shopping vehicle would not have gotten traction in consumer markets. Fortunately for e-merchants (and for credit card companies!), credit cards provided an easily adapted method of payment for products and services online. EFT (electronic funds transfer) infrastructures were in place, approval processes were established, and consumers' wallets were bulging with plastic. The conditions were ripe for e-commerce.

Putting credit cards in the context of economic history, these plastic rectangles are fairly new avatars of money. Franklin National Bank in New York launched the first real credit card in 1951, but the industry did not experience dramatic growth until the last three decades of the twentieth century. Prior to that time, shoppers had to pay for their purchases solely with cash or checks. Clearly, cash or checks are not an acceptable means of purchasing online due to the logistical problems that those currencies would represent in an electronic transaction.

To be sure, the use of credit cards for online commerce has encountered stumbling blocks. Attempts by felonious hackers to steal credit card numbers and use them fraudulently have, from time to time, set off panic among financial institutions and consumers. But consumers are becoming increasingly confident. Despite some concerns about credit card security, consumers are willingly using their credit cards for all types of online purchases. Therefore, the advent and acceptance of credit cards, and the comfort level in using them as a means of spending, has been an important prerequisite for e-commerce.

THE FAMILIARITY WITH PERSONAL COMPUTERS

A fourth important contributing factor to the market's readiness for e-commerce is the adoption of personal computers in businesses, homes, and schools. Personal computers were the sole access vehicle for the Web when it first became available to the mass population. Developing a comfort level with PCs was an important hurdle that consumers had already cleared. This made it much easier for the Internet to get rapid traction in the market.

By the mid- to late 1980s, PCs had become a common productivity tool in offices. In fact, it was in the work environment of the 1990s where many consumers first began to comprehend the powers of electronic communications and online information retrieval. Schools had been using PCs as educational tools from kindergarten to twelfth grade, and many universities required students to have PCs in order to be accepted into college programs. Millions of households owned PCs as well. And across the population, more people outside of clerical professions learned a vital skill: the ability to type.

Prior to the advent of the Internet, PCs were solidly entrenched in many aspects of consumers' lives. In fact, when asked which technologies had a positive impact on consumers' lives in the twentieth century, home computers were named by 87 percent of consumers polled, ranking just below automobiles (91 percent) and above television (73 percent).

If PCs had not already successfully penetrated the market, the adoption of the Web as a commerce device would have been much slower. Consumers would have had multiple obstacles to overcome in learning how to use the gadgets and technologies required to make online contact, not to mention the expense of acquiring the requisite setup to do it. Certainly, there are still large portions of the population who do not yet have access to PCs or to the Web, but every day more people gain access.

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