Power Shift: Marketing in the Customer-Driven Future

For most of us, selling into a buyers market means dealing with customers that negotiate tougher, play vendors against each other, and often get just about anything they demand. For David Moschella, these daily realities mask a more profound shift in market power.

Moschella, a veteran consultant, Computerworld columnist, and author of Customer-Driven IT: How Users Are Shaping Technology Growth, suggests that a fundamental change has taken place over the last decade and that marketers ignore it at their peril. For the first time in the history of the industry, he says, customers are firmly in the driver’s seat with regard to growth: “The IT business had always been driven by the product side of the house. When the Internet really developed, though, it was the first time that technology users were directly creating value for other users.” Firms like Amazon.com, eBay, and E*TRADE began to create substantial value from IT for consumers and ultimately played a greater role in driving people onto the Internet, and thus promoting IT sales, than the IT suppliers themselves.

The power shift didn’t matter much during the Internet bubble because the whole IT industry was booming. Now, according to Moschella, customers must take leadership in developing additional value from IT if the industry itself is to return to solid growth.

It is a provocative argument, and Moschella is careful not to take it too far. For one thing, he readily points to larger economic and political factors that weigh heavily on the industry’s prospects, such as the situation in Iraq and with global terrorism. For another, he continues emphasize the importance of continued innovation within the industry.

In vertical market after vertical market, though, Moschella points to questions that dominate the demand side of the equation and asserts that IT firms have little sway over the answers. “The most obvious example is the music industry,” he says, where the leading companies have resisted, rather than embraced, new technologies such as peer-to-peer sharing that could bolster IT growth in that sector. “But it’s the same in health care, in government, and many other industries. There is enormous potential business, but it is mostly out of the traditional IT industry’s control.”

Consider the case of radio frequency identification technology (RFID), which could revolutionize supply chain management via wireless tracking of virtually any item. Industry pundits have been pushing the technology for years. Only now, with mega-retailer Wal-Mart pushing its top suppliers to use it, is there a chance RFID will gain serious momentum. “This technology is incredibly important,” says Moschella, “but it needs standards and critical mass in the retail industry. The big driver is Wal-Mart getting all its suppliers to use it.”

For an industry still largely focused on product innovation, the power shift is jarring. Yet marketers, especially services marketers, are far from helpless. As the critical link between customers and IT firms, marketers can influence the degree to which customers themselves exert greater leadership in technology innovation and investment.

If Moschella is right, at least four types of strategic marketing initiatives will prove essential to boosting customer leadership:

• Industry transformation. Many IT marketing organizations already emphasize vertical marketing. Beyond expanding vertical expertise and focus, Moschella argues that IT leaders need to envision the IT-based transformation of specific industries and tap into leading-edge industry discussions. “It’s thought leadership with real substance. Customers are open to it; marketers should be supporting the emerging industry standards and being a visible part of the larger process of change.”
• Public and customer confidence. Marketers should tackle more aggressively the diminished reputation of the industry as a whole, working to build rebuild trust in the integrity of business practices and of technology performance. “So much of the IT business is now in the mind of the customer,” says Moschella. “The big issue is the confidence of customers and their ability to get excited about IT.”
• Globalization. Although the United States remains the largest IT market as well as supplier, the shift to customer leadership suggests that more direction for the future of the industry may come from outside the United States. This has already been the case in areas such as wireless systems and online banking. For U.S.-based companies, this may mean putting even more emphasis on global marketing and relationship building.
• Services leadership. Finally, the shift to customer leadership puts IT services organizations that much more in the center of the industry. As customers take the lead in developing new standards for their industries, it will be up to the services organizations to facilitate the integration of appropriate technologies and processes.

In the end, Moschella remains optimistic about the industry’s prospects. “Every generation of technology has enjoyed a long period of expansion, and for the Internet that period still lies ahead,” he says. For the first time, however, the pace of change and growth will depend much more on IT users than suppliers

What do you think? Is Moschella on to something important? Are services marketers ready for the customer-driven future? How is your organization addressing the major customer challenges in key vertical markets?

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