This article makes some really good points about the way companies have to compete today.
Well, here it is. A simple Theory of Everything in Business: in an oversupplied economy, customer feelings drive purchase decisions and profitability.
Are you competing in a market category oversupplied with interchangeable products or services? Can customers easily (remember, this is subjective) switch from you to a competitor and get just about the same benefits? Do you find yourself frequently competing on price?
Welcome to the feelings economy, where planning what to make and how to market has changed dramatically—and permanently.
It used to make sense to pay attention to your industry and benchmark your direct competitors. It used to be enough to learn and diligently apply the latest sales and marketing tactics and techniques. It used to be prudent to treat business like war and try to kill your competitors.
But not any longer. It should be apparent to you by now that the status quo is not working.
Your new imperative is to assess and appeal to your customers' feelings—period. Feelings are the basis for all profit generating consumption in a market at the mercy of customer choice. Focus on feelings, especially the subtle ones that customers themselves cannot articulate.
This is very similar to what Virginia Postrel says in her new book (which I love more and more all the time, because I have realized how relevant it is). I think our society has become so wealthy that price doesn't drive decisions as much as it used to, although obviously, it is always a partial factor. Branding has become so much more important because of this and not just product branding, but company branding. That is why I think companies today need to portray a positive image.
We often debate whether or not a company has social and/or environmental obligations. Most hard core capitalists like myself think that ultimately, companies have a moral obligation to shareholders. This is true, but I think this view is a bit too narrow given today's economic atmosphere because it often assumes that decisions with positive social outcomes detract from shareholder gains. But when feelings matter more and more, I think consumers look at how socially and environmentally responsible a company is. Granted, companies shouldn't be donating all their profits to charity or anything like that, but I think positive press due to good social decisions can be a minor competitive advantage, and contribute to increased value for shareholders.
Of course, this raises some questions, like whether or not using new techniques like memory morphing to improve customer feelings is really ethical, but that is another post.