Bring the Customer into the Control Room and You'll Sell More

Imagine they ask you to vote not for a party, but for the new product concept that a company intends to launch on the market. Imagine that this firm, just like a political institution based on direct democracy, is committed to manufacture those product concepts that get the larger share of votes. What would our reaction be with respect to a company of this kind?

In fact, a growing numer of firms, thanks to opportunities afforded by the web, are turning to democracy for answers. Threadless, for instance, lets users express their preferences over T-shirts created by other users and only merchandises those that get a lot of votes. M&Ms lets consumers decide over the color their chocolate candies, while Mountain Dew lets them have a say over the taste of new soft drinks.
Is it just a fad or are there rational managerial motivations justifying this new readiness to give customers voice? Economic literature explains the phenomenon in terms of the reduction of risks and costs associated with the innovation process, of contraction of the time-to-market, and a better fit of products created with respect to market demand. Together with Christoph Fuchs at the University of Rotterdam, we have shown how there are also psychological reactions unchained by customer empowerment that point toward the adoption of such strategies, which are more easily implementable thanks to the diffusion of network technologies.
In our 2010 article on the Journal of Marketing (The Psychological Effects of Empowerment Strategies on Consumers' Product Demand, with Cristoph Fuchs, Aarhus School of Business), we test the hypothesis that consumers involved in the selection of products to be marketed exhibit a higher propensity to purchase, in spite of the fact that such products are objectively identical to other market alternatives. This seemingly irrational behavior is the result of a higher sense of responsibility and sense of psychological possession vis-à-vis the products which were made also thanks to one's own contribution. This effect is more marked the more the final outcome reflects individual preferences (i.e. customer involvement is more likely with homogenous preferences) and the more the individual consumer feels endowed with sufficient knowledge supporting his/her choice.
In a series of other experiments, involving more than a thousand users, we have shown how the advantages of openness and empowerment go beyond the increase in market demand and bring long-term benefits for the relation between the company and its customers.
In particular, we have shown that there are three crucial effects justifying investment in customer empowerment. Firstly, it increases the level of identification with the brand. Secondly, this effect lasts even if empowerment does not concern product decisions, but, for instance, the CSR initiatives that a company supports. Lastly, when the the correspondence between the outcome of joint decision-making and individual preferences is high, the empowerment effect is stronger if the decision is taken by an extended community, even though individual votes would have had more impact on a smaller group. People feel included by the notion that they are all acting as part of "one large movement" to which they belong.