COMMENTARY

The Age of the Consumer Is Already Here

August 2004

By Donald J. Pfundstein*
for New Hampshire Business Review

The information age. The digital economy. The era of globalization and offshore job displacement. These are all steps in what I believe will ultimately become known as The Age of the Consumer. Let me explain why.

There are a number of forces under way, particularly in maturing and developing capitalist democracies, which are converging to make the consumer paramount. Technology has already empowered the consumer. Compare typical consumer transactions with how they were conducted a mere five years ago. Start with the purchase of an automobile. Although not yet equal to the dealer in access to information, the consumer has much useful data at her fingertips. Effective use of this data can result in substantial savings. The data are available for free.

When is the last time you waited in line for written directions for your road trip destination? Although the national organization historically found in this space has an Internet-based service for subscribers, you can get useful directions for free on the Web. Checking the results of a free search against a printed atlas seems to work quite well. (I still use the national service nonetheless because of its widely recognized roadside assistance program.)

Technology has enabled consumers to more comprehensively and efficiently research and compare products. It has enabled us to save (well maybe not save), invest and borrow money more easily than at any prior time. The Web and related technologies also enable us to purchase many types of tangible and intangible products 24 hours a day. Auction and other trader-like services work to keep a seamless, international consumer marketplace as efficient as the flow of information and goods allow.

In March 2002, I reviewed what I called “Consumer Federalism.” I noted that consumers would be forced to seek political intervention because of the faceless mega-companies’ poor service. I believe this populist reaction will continue. Not only have consumers been empowered by technology, but they have been dehumanized by it as well. This dehumanization process created by automatic call centers, Web site self-help programs, labor transfers and the general inability to get a knowledgeable human being on the phone will cause a backlash against the accelerated deployment of technology. This will likely enable some product and service providers to differentiate themselves by focusing on delivery of exceptional service.

Increasingly more empowered by technology, the disgruntled consumer will turn the technology against the source of her dissatisfaction. The only way to mitigate against this is by providing exceptional customer service. However, other forces under way when combined with those above will nevertheless assure The Age of the Consumer.

The pursuit of regulatory relevancy will help usher in the Age of the Consumer. Regulators are responding to economic globalization and the resulting international business entities’ thirst for uniformity across jurisdictional lines by vigorously asserting themselves as the consumer protector. True, this has always been a primary role of regulators – but it has taken on a new importance. It’s the need to demonstrate persistent relevancy in fluid global markets that creates this pressure.

The insurance side of the financial services sector is a good example of this phenomenon. In June, the National Association of Insurance Commissioners (NAIC) presented Congress with its Road Map to Modernize Regulatory Standards. Also check out the NAIC Insurance Regulatory Modernization Action Plan and its Framework for a National System of State-Based Regulation (naic.org). In less than five minutes, you will note the primary emphasis is on consumer protection.

This approach is responsive at least in part to changes in the manner in which the business is conducted. I believe the NAIC is absolutely correct and have previously noted that the New Hampshire regulator has adopted the strategy in a meaningful and valuable way.

A consumer still needs a locally knowledgeable protector when automated navigation of sophisticated transactions goes astray. The mega-companies and the federal or other national or continent-based systems of regulation are simply too large and too far removed to work. Certainly there is a need for collaboration and coordination between local, national and global authorities — Consumer Federalism.

Even those businesses that are not considered traditionally regulated industries are headed in that direction. Look out gasoline and oil dealers, software companies, cable and Internet providers, big box retailers and auto dealerships. You can bet that managers of these businesses will spend increasingly larger amounts of time dealing with government regulation.

Stage right for the trial lawyers. Some say class action litigation is in many respects a form of consumer protection, albeit not an altruistic one. Attorneys general around the country seem to be focused in a much more targeted fashion on the area of consumer protection. Legislators have demonstrated a renewed interest in the area. Everyone is focused on the consumer. Businesses can expect more consumer protection regulation and enforcement. We are already living in The Age of the Consumer.

*Donald J. Pfundstein is admitted in New Hampshire.

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