Marketers and business writers have been talking for ages about disintermediation – cutting out the middle man – in a bid to achieve more direct and economically efficient relationships. But the battle between Hachette and Amazon reminds us there are still very powerful players mediating between customer and producer.
So, why in a world where direct contact seems so easy and where brands are so keen to cultivate communities do some intermediaries continue to thrive – and what lessons can others who stand between maker and end buyer learn from these successes?
Surprisingly perhaps, the answers to adding value as a bridging party in the digital age (and therefore not being squeezed out) seem to come down to four critical but very simple factors that still count for a lot: influence; time; relationships; and the ability to give valuable advice.
1. Be the platform – these powerful intermediaries are aggrandisers. The brands that supply to them are stronger and more credible for being seen in their company than they would be if they went it alone. These intermediaries in essence act as platforms for the brands they support, elevating the value of everything associated with them. But whereas more traditional intermediaries look to stock and supply, these intermediaries treat their brands as assets and in magnifying their perceived value they also increase their worth. In so doing, they establish a ‘virtuous circle’, where the brands are more powerful for being in their company, and the company is famous for offering access – sometimes exclusive access – to these brands. Washington Speakers is a great example of the platform principle in action. If you are part of their stable, such exclusive membership is a credential in its own right.
2. Be the tastemaker – these intermediaries direct traffic often in competitive, crowded sectors. They cater to our very human nature to seek reassurance that we are making good decisions. Their verdicts – often crowd sourced – decide who others decide to go with. The obvious examples are review sites like TripAdvisor for anyone considering a trip. Other successes include those who’ve gathered expertise to provide readers with information they want but can’t easily access – e.g. Open Table for anyone looking to eat out. These intermediaries depend on their accumulated authority and of course the convenience of having many opinions in one place.
3. Be the landing page – these intermediaries act as timesaving destinations, particularly online, bringing people to a single place where they can gain access (and deals) that they could seek out individually but that would take so much more time. Amazon, iTunes, the App Store, Expedia and Ticketek are powerful examples of shortcut channels. On one level, these intermediaries add value through venue. They cut the “search cost” by being the landing page for their sector. More than that though, the intermediaries that are market leaders today often provide an element of curation that consumers are prepared to pay a margin for. There are also offline examples. Buyers swarm to Wholefoods because of the trust that they extend to that brand to ‘forage’ on their behalf for the freshest and most natural produce.
4. Decide what gets decided – through their algorithms, these channels provide the parameters within which millions of people have relationships and make decisions. Google, Facebook, Linked IN, dating sites and others sift through all the variations to present people with more manageable and relevant bases on which to manage aspects of their lives. From PageRank to articles that might interest us to prospective dates, these intermediaries give us a view of the world that presents as a great deal of choice. For those with a technical bent wanting more detail, this fascinating article lists 10 algorithms that have a significant effect on the running of our world.
5. Lead the new charge – intermediaries like Uber and Airbnb are changing how consumers work together to challenge old frameworks. Their role is both functional and emotional. Someone has to bring the new participants together and act as a meeting point. At a more impassioned level, these intermediaries are a rallying point, an inspiration if you will, for new ways of addressing old and frustrating problems. Brands in the collaborative economy exemplify both these roles. They act as collecting points for people and new actions and in so doing build a community of early adopters that has commercial value. Great article here on Uber’s effect on the taxi industry.
Convenience, price, consolidation and networks are features that will continue to deteriorate in value
OK, I can hear some of you saying, that works well for big brands, but what are the implications for smaller players? How can they apply at least some of these principles to their advantage? Most middle players have now moved on from the interruption model of simply looking to stand between the parties and hand things through. Most have recognised that convenience, price, consolidation and networks are competitive features that will continue to deteriorate in value. Most have also seen that some level of advisory is now expected. So where to from here? Some options:
The shift from intermediary to advisory
6. Become an authority in your area, but more than that, like the aggrandisers use those credentials to magnify the worth of what you stock. Look for ways to be a certain kind of what you do. Appeal to a particular and passionate market. Represent a specific interest or lifestyle. Make being in your store a sign that they have ‘made it’ for the supplier and a delight that they have ‘got it’ for the buyer. Don’t just be a destination. Be a status.
7. Guide buyers through busy and/or murky waters. Be the pilot. Present options. Mary Portas makes the excellent point that retail stores for example often focus too much time on stocking and not enough on filtering all the choices into manageable options.
8. Prudently (yet radically) expand your trust boundaries. If you are already known and trusted in a particular area, leverage that to invite customers into an adjunct sector that feels like a natural extension for them. The balance that needs to be struck here is to see past the predictable trends, so that your new offer doesn’t just look like the same ‘more of more’ as everyone else, but at the same time is not so lateral that consumers are left confused or concerned. Getting this right requires real discipline (right extension, right timing, right consumer, right margin) but offers exciting opportunities to reframe your relationships, refresh your value proposition and distance yourself from others.
9. Lead the conversation in new directions. While online has been seen by some as a significant threat to intermediation, there’s little doubt it also offers opportunities for some companies to make an impact with what they have to say. What’s the biggest frustration that consumers or sellers face? How can you reconcile their differences? Or is there distinction (and money) to be made in advocating for one side? If there’s no future in being everything to everyone, can you become everything to someone?
10. Shift the middle – don’t like where you’re positioned at the moment? Move. So many intermediaries don’t give enough thought to what would happen if they put themselves between different parties than those they stand between now. Here’s a counter-intuitive opportunity: look for a way to place yourself between parties that don’t trust each other or where there is low transparency. In such circumstances buyer and seller alike will value a reliable, trusted, accountable, efficient, neutral and updated platform through which they can trade.
In many ways the rules for success as an intermediary brand today are no different than they are for direct brands: deliver consumers things they want or need in interesting and streamlined ways that surpass how they might be accessed otherwise.