P2P vs The Rational Consumer

Rory left an intriguing comment in the post below about brands in the Gift Economy.  "The thing about the gift economy, as you term it, (and free culture in general) is that in the world of the rational consumer, it doesn't work. And unfortunately (or fortunately if you create competitive advantage for a living) most brand owners (certainly in the music industry) are still doggedly following their yellow brick road to the fictional land of the rational consumer.  The gift economy, free culture, experiential marketing and customer engagement are all P2P concepts. These concepts simply don't fit most current brands. Most big brands and legacy agencies are desperately scrabbling around to save themselves with new creative concepts and marcoms strategies. What is needed is a more fundamental look at brand architecture."  My sense is that far from being 'concepts' P2P aka 'give a little take a little' is increasingly how people go about their daily business - at least online eg recommendation services.  So it looks like we're not in Kansas anymore.  The question is where does the review of brand architecture, that Rory refers to, actually start?  Any thoughts?

Comments

Fair point they're not 'concepts' they are the new reality. But my point was that old school brands are based on talking _at_ or trying to become an object of desire for large aggregated groups of rational consumers. The brand is geared to profit maximising in a world of the asymmetric mass market.

These brands are too cumbersome to be a "peer". They are caricatures not characters.

[James Cherkoff]

Thanks Rory, I think your analysis is spot on.

So if brands are geared to maximising profits in a mass market, but that mass market is changing, how do brands change gears to make sure they can keep up?? And if they don't is their profitability going to be affected? Or can they just keep on rolling for years to come? Maybe they can just let others play P2P and pick off the winners as they emerge from the soup....?

I feel like I am in an online Viva Voce

- How do brands change gears to make sure they can keep up??

I would say it is incredibly case specific. A lot would depend on the annual value per customer to the brand, but that in itself can be changed through the brand architecture. What you have to ask is, should the brand architecture attached portfolio of products and services below this change to fit an undeniable and massive change in consumer behavior (ie. they no longer want to just passively _consume_ a brand), or as you say, can existing brands simply sit back and say "our market doesn't fit this new paradigm, we're safe"?

- And if they don't is their profitability going to be affected? Or can they just keep on rolling for years to come?

This for me is the real interesting question. I was recently discussing on a different blog that I think we have gone beyond the era of Schumpeter's 'creative destruction' into 'reductive destruction'. If you look at what is happening through a combination of free culture, advanced global capitalism and the Internet; where companies used to face threats from competitors who blew them out of the water with a new more efficient (read profitable) model, now you have established markets being taken to bits by communities who aren't necessarily even looking to profit. The target is simply any area where a brand is being used to generate abnormal profit and often it is the customers themselves who are doing this. Think OSS, think music Industry, media, advertising, the list is growing and this is just the start.

In essence the areas being targeted were living off artificial monopolies and economic rent which by definition is short term. If companies view this from the perspective of the opportunity cost of ditching their traditional market, it is unlikely that the P2P alternative will deliver greater profit, so they will "keep rolling on". However many, I don't think all, but many, are rolling towards a precipice where there traditional market disappears into a puff of magic MySpace dust.

- Maybe they can just let others play P2P and pick off the winners as they emerge from the soup....?

This will inevitably happen, markets are quick to change, wealth distribution is slower. MySpace/News International being the perfect example. For a large established brands this is always used as an excuse to avoid looking at their own business and to avoid the pain and risk of innovating themselves. However, it can be a very dangerous game to play if you get it wrong, or more to the point, if your competitor gets it right before you do.

[James Cherkoff]

Excellent stuff. Three years ago I saw Doc Searls make a presentation at Reboot which he concluded by saying that: "In networked environments, the demand side supplies itself." To my mind, the question is how can companies and brands become involved in the creation of such 'DIY supply-chains'? Sometimes, there is a sense that by becoming involved they are cannibalising their own markets - a sort of community-powered version of the Innovators' Dilemma. However, as you say, P2P communities are often trying to scratch an itch the market isn't helping them with - not create profit. So brands and companies should stop seeing such groups through the 'competitor-kill-kill-kill' lens and see them for what they are - customers declaring a need. Look no further than the music industry (RIP) to see this misunderstanding writ large...