Journal of Management Information Systems

Volume 25 Number 2 2008 pp. 13-40

How Information Changes Consumer Behavior and How Consumer Behavior Determines Corporate Strategy

Clemons, Eric K

ABSTRACT: Information availability has increased consumers' informedness, the degree to which they know what is available in the marketplace, with precisely which attributes and at precisely what price. This informedness has altered the demand side of market behavior: customers now discount more heavily when comparable products are available from competitors and when products do not meet their wants, needs, cravings, and longings, but they no longer discount as heavily when purchasing unfamiliar products. Changes in the demand side are producing comparable changes in the supply side: firms earn less than their expectations when competing in traditional mass-market fat spots, while earning far more than previously when entering newly created resonance marketing sweet spots. We trace the impact of hyperdifferentiation and resonance marketing on strategy, with a clear progression from a limited number of fat spots, through reliance on line extensions, and ultimately to fully differentiated market sweet spots.

Key words and phrases: consumer informedness, long tail, marketing strategy, online reviews, resonance marketing, word-of-mouth marketing