This Social Media Thing

It is easy to underestimate the extent to which the market dominance of many organisations and brands are dependant on the ability to control and exploit mass information channels. In the same way the media had to create content that was shaped to appeal to mass audiences, businesses had to produce products that would appeal to mass audiences, with the mass ‘brand’ being the natural extension of this.

There are basically three elements to the creation of a product or service: one is the R&D to design and develop it, second is the ability to manufacture and distribute it and third is promotion. Almost all of the products that we have and are associated with established, mass (consumer) brands, which are not dependant on the development of new technologies (such as computers or mobile phones) were invented many years ago. The organisations that own these brands don’t do R&D any more, they do ‘innovation’, which is basically finding new ways to add bells and whistles to existing brands to try a create differentiation and excitement. Most manufacturing is now also outsourced, removing the ability to create differentiation through quality or uniqueness of manufacture. This leaves promotion as the only major controlling lever that most mass brand owners have. But this is a powerful lever because you can use it to stifle competition – simply because the promotional requirement to sustain a mass brand is so great, it represents a huge barrier to entry. However a large part of the promotional spend is tied up in buying mass media channels but social media presents the opportunity to communicate with mass audience for free.

This doesn’t necessarily mean that new niche brands, using social media, will suddenly emerge and become as big as their predecessors (although there may instances where this occurs), rather a process will emerge which will enable a large number of niche brands to steadily steal away niche segments from mass brands.

This need not apply in sectors that are based purely on physical products. The financial services sector is starting to see the rise of niche products and processes as organisations emerge which allow individuals to transact with each other through peer-to-peer lending. The institutional function of financial service provision, which channels consumer or customer demand through a limited number of product or service channels, is being replaced by a process which allows highly tailored and specific solutions to be brokered between the crowd of people who have something (money in this instance) and a crowd of people who want something.

Of all of the three hammers, this will ultimately be the one most difficult to deal with even if, in the short-term, the issue can be held at bay by creation of a more niche approach to product development and customer segmentation and communication.