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United Airlines CEO Oscar Munoz (L) and UAL President Scott Kirby prepare to testify at a House Transportation and Infrastructure Committee hearing on "Oversight of U.S. Airline Customer Service," in the aftermath of the forced removal on April 9 of a passenger from a UAL Chicago flight, on Capitol Hill in Washington, U.S., May 2, 2017. REUTERS/Kevin Lamarque - HP1ED5211NJ53
Reuters/Kevin Lamarque
United’s executives eventually had to answer for the airline’s scandal.
IT'S ALL HAPPENING

We used to kowtow to corporations. Now they’re starting to kneel down to us

By Marc Bain

United Airlines is a giant company. It earns billions every year, operates more than 4,500 flights every day, and shuttled upwards of 143 million people through the air in 2016.

But it only took one customer and a video that raced across the internet to send the company into turmoil. The footage of a security officer violently dragging passenger David Dao from his seat on an overbooked flight quickly shaved $1 billion from United’s market value and prompted CEO Oscar Munoz to adopt numerous policy changes on how the company deals with customers and overbooked flights.

With work, United has since bounced back, but the incident illustrates a vital point corporations everywhere would do well to keep in mind. The balance of power between companies and their customers is rapidly shifting in favor of the customers. As A.T. Kearney, a global consulting firm, explains in a new report, brands no longer have the same control they used to over the flow of information, which means they no longer get to dictate how, when, and sometimes even where customers buy whatever it is they’re selling. At the same time, customers are increasingly buying based on values—not just value—and their trust in corporations is eroding.

For its new report, titled “America’s Next Commercial Revolution: Influence vs. Affluence,” A.T. Kearney examined demographic, economic, and technological trends to predict how US buying behavior will change over the next 10 years. (The firm also released a global version based on surveys with more than 7,000 consumers across seven countries.) The main finding was that a “perfect storm of demographic shifts, changing values, and hyper-connectivity” is permanently altering how we spend our money.

“The destabilization goes deeper than anyone really appreciates,” says Greg Portell, lead partner in the retail practice of A.T. Kearney and one of the report’s authors.

The marketplace of decades past had companies at the center. For the most part, information and influence flowed outward from brands to the consumer. A.T. Kearney calls this the “Affluence” model, since brands spent huge sums convincing consumers that their self-worth was based on what and how much they owned.

But the internet and social media have dramatically altered this, amplifying consumers’ voices to the same volume as the brands’, as new, online communities coalesced around shared beliefs. A.T. Kearney calls this the “Influence” model.

At the same time, demographic shifts are reshaping society

Diversity in the US is on the rise, which also translates to more diverse needs and values among consumers. The traditional notion of the nuclear family has similarly given way to a plurality of family arrangements, including more single-parent and LGBTQ families, for example. Gen Z, the generation born between 1998 and 2016—and the largest generation in the US—is growing up in this environment, making its expectations radically different from those of the generations that produced many of the big companies currently dominating US and global commerce.

One of the big takeaways is that trust in corporations is declining fast, thanks to defining events such as the Great Recession and a near-constant stream of corporate scandals, from the United incident to the bank accounts faked by Wells Fargo to the recent security breach and subsequent fumbling of it at Equifax. A.T. Kearney’s surveys found more than half of consumers in the US, as well as in the UK, France, Japan, and Germany, had little or no confidence in big corporations. The number has grown rapidly in just five years.

Another finding is that it’s becoming far more difficult to build a mass brand. “The concept of a brand that is widely accepted and widely valued really becomes a lot harder to create in today’s world,” Portell says. “Part of that is fragmentation, part of that is sociodemographic.”

Instead of one mass market, a collection of micro-markets is taking its place. Successful brands are figuring out how to cater to these different communities, with things like customized recommendations and personalized products. Adidas, to take one example, is investing heavily in being able to make shoes for specific groups of athletes, based on where or when they run, for example.

This new paradigm has also reshaped the way brands scale. Under the old model, Walmart became successful because of its ability to quickly move truck loads of products from a hub to other locations. A newer model, symbolized by companies such as Amazon, puts the focus on figuring out the so-called last mile, to get goods directly to customers’ doorsteps.

“Amazon doesn’t become successful because they have big trucks driving from point A to point B,” Portell says. “They become successful because they know exactly what a particular household needs, and can get it to them very quickly. That’s why shifting of scale becomes very important.”

These changes are set to accelerate in the years ahead. If companies want to keep up, they need to earn trust, signal their values, and deliver tailored products and services as fast as they can.

That’s not easy, Portell admits. “It’s an incredibly difficult environment,” he says, “but they get paid to figure it out.”