Trends: Powershift

There are new rules to live by as "super consumers" are now in control of the market.

Currently, one of the biggest changes in our industry is a shift in power to the new "super consumers." It's a change that began 20 years ago as power shifted from the manufacturer, to the retailer, to the consumer. This shift will have a profound effect on your company and brand for years to come.

Today's Internet-savvy super consumers have unprecedented control over a company's destiny. They control a company's brand, new product development, pricing, customer-service policies, and product quality.

First, a quick history lesson. In ancient times, say, the late 1980s, manufacturers saw their historic power and influence over the market weaken for the first time as power shifted to major retailers and distributors. Up to that point, manufacturers were the primary decision makers on what items the industry would sell. Products came to market primarily in a "push" arrangement where manufacturers controlled products, distribution, and terms.

In the 1990s, power shifted to the next step in the distribution chain—major retailers and distributors. Consolidation and increased market share gave retailers and distributors new buying power. They dictated to manufacturers the terms they wanted and what products they wanted to buy. During this time, there was some turmoil in the industry as manufacturers' traditional retail prices, margins, and distribution models were disrupted.

The late 1990s and turn of the century saw the next power shift as consumers took over, aided by the Internet. The industry also became more segmented, as new trends emerged and consumers formed smaller, more specialized groups, including local clubs organized by interest or age, online discussion groups, and destination events. Consumers could dictate terms, prices, and even distribution models. This is when online group buys and eBay became major disrupting forces. More products came to market in a "pull" arrangement where consumer trends created demand.

NEW RULES OF THE AFTERMARKET

This brings us to the major changes happening today. We're now seeing another major power shift, as the most savvy of super consumers are in control. More power is concentrated in these über consumers than many of us could have imagined a few years ago. They have very little brand loyalty, deferring to friends' recommendations or product reviews found online. They are extremely sophisticated and routinely comparison shop for price and availability. They are multichannel customers and will communicate and purchase products from a retailer or auction Web site, by e-mail, cell phone, or at a store. Super consumers are as likely to buy from a large or small business located across the street or overseas. They are extremely networked and know dozens more people by name than our parents ever did.

As a result, there's a completely new set of rules by which aftermarket businesses must play.

First, marketing strategies have to take into account we're not in charge. Any company that thinks they alone can define their brand is sorely mistaken. The best we can do is guide, protect, and nurture a brand, but ultimately it will be defined by the super consumer in product reviews and online discussion groups.

The Internet makes quality, service, and price "transparent" and defined by real-world experiences. If you want an upscale image, but your quality sucks, the world knows it. If you want your products to appear highly engineered, but they're generic and come from an unnamed Asian factory, consider yourself caught red-handed. If your main strategy is to have the lowest price, someone on eBay working out of their garage just beat your price.

Second, marketing must be relevant. Car enthusiasts are self-organized into more groups and subgroups than at any time in history. These groups overlap, evolve, and split into more subgroups. If your company doesn't market to the right interest group with the right products, you're wasting time and money. A company that may have had a dozen competitors a few short years ago now could have a thousand, each one competing against 5 percent of a company's product line. For another look at this change in the marketplace, re-read this column in the September issue of Styling & Performance, discussing "The Long Tail".

Third, benchmarks are out of our control. Customer expectations are set by experiences with companies in any industry. If you're a specialty-parts Internet retailer and your customers also buy books from Amazon, they'll have a hard time understanding if your Web site doesn't also include product reviews and recommendations.

If you're a manufacturer and any of your end consumers play guitar, they'll want to ask your staff or your customers tech questions on your Web site like they do on Fender's Web site, without understanding or caring about the hundreds of thousands of dollars it would cost to duplicate that experience.

If your customers can return a product to Target without a receipt because the customer-service desk at Target can access the complete purchase record, these customers will be annoyed if you require them to bring in a crumpled piece of paper to prove they bought a part from you.

What this means to your business: Forget the old marketing rules, there are new rules by which to live. Make sure your marketing is relevant, figure out how to meet customer expectations, and plan your company's marketing strategy around the new super consumers.

SPECIALTY PARTS ONLINE SALES BREAK $1 BILLION IN 2007

Annual online sales of specialty performance parts and accessories are projected to pass $1 billion for the first time in 2007. After a slower annual growth rate for the past year, this is a trend that will accelerate in the future by around 20-percent per year. Although it took the industry more than a decade to reach the $1 billion milestone, it will only take us a few years to break $2 billion in online sales, which will happen in 2011.

This online sales growth is huge, but it doesn't even take into account the multichannel sophistication of the new super consumers—shoppers who do their research online, then purchase over the phone or in a retail store.

If you have a brick-and-mortar business, super consumers may evaluate your inventory before buying from the lowest possible price source—unless you can educate and convince them your service is worth the extra cost. If the price differential is significant, plan on losing some business to the low-cost sales outlet—at least for a while.

What this means to your business: You should plan now for the industry's first $2 billion year. Even if you don't sell online you can't afford to not market online.

Jon Hedges of Hedges & Company is a long-time veteran of the automotive aftermarket specializing in database marketing, strategy, and research. He can be reached at (330) 474-1650, or via the Web site www.HedgesCompany.com.