14 Examples of the Consumer Economy
John Spacey, March 04, 2021
The consumer economy is an economic system fueled by the needs, perceptions and participation of individuals. This is a broad economic trend that began in the 1920s that has intensified with the introduction of technologies such as the internet that allow for broad consumer participation in economic processes. The following are illustrative examples of the consumer economy.
ConsumptionAn economy where most consumption of economic goods is by individuals. This can be contrasted with an economy where businesses or government departments consume most resources. In an developed nation, it is common for personal consumption to be the root of 70% or more of economic activity.
AdvertisingConsumers buy what they know thus creating a huge market for gaining the attention of consumers.
Customer NeedsIn a consumer economy, producers seek to fill customer needs and even try to discover latent needs of which customers are unaware. This is efficient as producers constantly work to maximize their value to the end customer.
Commoditization of ExperienceIt is common for producers to seek to fulfill customer's greatest needs. This may extend into all areas of the human experience. For example, a television show that fills a need for social stimulation or adventure. It can be argued that the use of products, services and media as a replacement for authentic experience can become a problem.
VarietyPeople have diverse needs such that producers in a consumer economy produce significant product variety.
BrandingIn a sea of product variety, consumers require simple cues to make purchasing decisions such as visual symbols and brand names.
Reputation SystemsHistorically, people buy brands they recognize such that brand recognition is a license to reduce quality but still earn high sales. Reputation systems are websites and apps that allow consumers to review products and services. This is increasingly used as an primary source of information for purchasing decisions. Reputation systems allow small producers to compete on quality and can penalize brands that overextend into low quality products.
Mass CustomizationMass customization is the evolving capacity to increase product variety to the extent that every product is customized for every consumer. For example, a customer who can reformulate their shampoo using a design tool until it is just right.
Comfort & ConvenienceConsumers tend to take the path of least resistance such that producers constantly work to make products and services more convenient and comfortable. This arguably has negative effects as it essentially makes life less challenging whereby challenges may have some benefit to the human experience.
Service EconomyIn order to serve customer needs, producers increasingly offer intangible value known as services. In an developed country, the value of services can greatly exceed the value of physical products. This is known as a service economy.
Consumerization of TechnologyHistorically, most computers and software were produced for businesses to their needs. This is changing as businesses increasingly use devices and software designed primarily for consumers. In theory, this can go quite far whereby software specifically for business will essentially become nonexistent.
Consumerization of EverythingConsumerization is a broad trend that can be seen in all industries including media, communications, education, healthcare, transport and finance. For example, consumerization of healthcare would involve home tests that allow consumers to proactively monitor their own health without involving the medical establishment. Likewise, algorithms and artificial intelligence could replace most visits to a doctor. In other words, healthcare is likely to become a consumer product whereby consumers have choice and control.
Consumerization of ProductionConsumerization of production, better known as long tail or crowdsourcing, is the ability of consumers to design and produce their own goods and services. This allows amateurs to compete with professionals. As amateurs greatly outnumber professionals, it is possible that this becomes the dominant form of production in the future. For example, an individual with an app that architects a sports stadium whereby the app makes sure the stadium is architecturally sound and calculates its cost. Such an app could allow all buildings to be architected as open competitions representing a serious challenge to professional architects. In other words, the future may have no professionals only open competition.
Economic BadsIn a consumer economy, producers are rewarded for creating economic goods for consumers but often have no incentives not to create economic bads such as air pollution in the process. This essentially leads to unconstrained production of economic bads. This could be mitigated with markets for economic bads whereby production of bads such as air pollution have a cost that producers could work to minimize.
Consumer EconomicsThis is the complete list of articles we have written about consumer economics.
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