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The New Market Power: A Democratic Exchange

by Nilofer Merchant  |  
August 7, 2007

Marketplaces are defined by exchange. In the Old World, exchanges took place via the Silk Road to China and caravans crisscrossing the Middle East. Today those exchanges often take place via the Web. Bits and bytes have replaced the ox and cart, but many companies still operate in old-school ways.

One of the fundamental truths about the technology market today is that consumers have tremendous power. Market power used to be much like a big castle surrounded by high walls and a moat to control access. Dell, Intel and AT&T are all examples of companies that fared well under that model. The peasants that supported the castle had little power because they depended on the castle for protection and the king controlled the drawbridge and the gates. That model is completely passé.

The New Way: High Visibility, Many Paths

If the old-school world was the castle and the moat, the new model is more like an aerial view of San Francisco—lots of paths in and out.

It used to be that if you kept customers in the dark, they didn't have many alternatives for access to other products, price comparisons, and the like. The first wave of the Internet put the kibosh on that. Consumers can find out more about offers, price-shop, blog about customer service, and chat with other customers who buy the same models, brands, etc. Think people who buy and "pimp" Scion xBs don't trade information on Scion dealers and aftermarket suppliers?

What is also interesting is that consumers today get a lot of things free or at reduced prices because of different monetization practices. All that's good. But here's the rub: Companies that produce great content, great products, great customer service, and all the things that relate to customer love require investment in those items to continue providing them; ultimately, if we give too much away free, not enough is left in the bank for a rainy day when we need to invest in the next level of growth to continue creating excellence for the marketplace.

A Level Playing Field

The Web has democratized shopping. It's easy now for a consumer with just a bit of knowledge to use Amazon, CNET, eBay,, or ShopWiki, to comparison-shop, read reviews written by other purchasers, or acquire incredibly detailed information on virtually any kind of merchandise.

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Nilofer Merchant is the CEO of Rubicon Consulting (, a strategy and marketing consultancy based in Silicon Valley that solves complex business challenges for high-tech companies.

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