Informed consumer


The concept of the informed consumer is fundamental in the law of the European Union. Since the Council Resolution of 14 April 1975, one of the primary objectives of the European Community, and then the European Union, has been the provision of information to consumers. The rationale is that market actors are enabled to make better choices when they are informed and have a greater capacity to understand the importance of their market actions and choices.

Definition

According to the European Union, "Information is a deciding factor for consumers when making their choices and affects both consumer interests and their confidence in the products and services circulating within the market."

Consumer expectation

The consumers expect to get fair treatment in the market place and avoid unscrupulous business dealings. They envisage a fair market environment that facilitates and supports several consumer rights:
With the advent of electronic media in marketing, and the mass information storage capacity of computers, consumer privacy has become a great concern. Hence, consumers want to ensure privacy of information. The consumers want to be able to cast off the invasive marketing methods, and threat of entry into the private system of consumers.

Importance

Consumer information is the most important element for consumer protection and policy decisions. It is the solution to issues ranging from online transactional threats, behavioural targeting, loss of privacy and other problems.
A consumer should treat every purchase as an important investment. Making an uninformed investment in the stock market can result in huge financial losses and this same concept applies to daily purchases. Being an informed consumer is advantageous to the economy, market and consumers.
An informed consumer is capable of making sensible decisions by gaining an insight about a product prior to its purchase. This insight equips the consumer with the data to arrive at an evidence based conclusion. This can be made clear through in a few common aspects:
It is the responsibility of the consumer to get all the information about the potential purchase and associated background before making a decision to buy a product. It is ultimately the consumer, through their market choices, which endorses or rejects a product, thus shaping the marketplace. Becoming educated about the consequences of a purchase makes the consumer both informed and responsible.

Effects on marketplace

Providing complete information levels the information asymmetries between the producer and consumer and improves consumer decision-making. Transparent information about the terms and conditions associated with the product or service make plain the regulatory requirements to redress any consumer grievances. Informing the consumer can also help set the consumer's expectations of the product, which can be useful to the producer.
Some businesses may be reluctant to inform their potential consumers, concerned that this might harm the marketability and attractiveness of their products. However, economic analysis indicates that informational asymmetry between the producer and consumer is detrimental to the marketplace and a major ground for market failure – with consumers left to make irrational decisions. Unbiased information can help solve market problems by equipping the customers with appropriate information, ensuring healthy market practices.

Customer know-how

The US Federal Trade Commission recommends that consumers:
The abundance of available information via electronic media has created a transformation of the market orientation. While traditional customer engagement required teaching the consumer about the product or service, consumers have become knowledge-ridden with strong opinions on how they want to spend their money. This trend is substantiated by Forrester Research which found "buyers are often between 70 and 90 percent of the way through the sales process before they ever engage a vendor".
This evolution in the market orientation can be a challenge for existing and emerging businesses. Some ways of taking advantage of the new market are to understand the target customers, maintain visibility to these people, and utilize grassroots tactics.
To deal with highly informed consumers, the marketer must understand that the consumer has knowledge about the product and be prepared to manoeuvre this knowledge into a sale, and be well-informed to provide comprehensive knowledge to the consumers.
With the increase in the variety of sources for consumer education, it is important for the marketer to enter the sales process at an early stage. The marketer must move ahead of the curve and make sure to bring some value to the customer’s purchase beyond just fulfilling his/her need.

EU legislation

EU consumer policy is designed to:
In an efficient, integrated EU economy underpinned by EU-wide rules, consumers must be able to trust that their rights will be upheld in the event of any problems when purchasing goods and services in other EU countries.
At an annual cost of 5 cents per person, the EU's consumer protection programme for 2014–2020 is designed to enforce consumer laws throughout the single market, giving consumers a high level of legal protection.

Statistics

According to the 2013 Edelman Trust Barometer, an online survey of 26,000 general population respondents across 26 countries, 35% of those identified as "the informed public" who need to hear company information three times to believe it, while another 29% need to hear it an additional 4–5 times.
The study also looked at how consumers place their trust in corporations of different sizes. In the US, 86% of informed consumers trust small businesses, while just 55% trust big businesses. A similar gap is apparent in the UK, but the opposite is true in China, where 89% trust big businesses compared to 65% for small businesses.
Whereas informed publics in developed countries are more trusting of small than big businesses, emerging market respondents placed more trust in big businesses. Overall, small businesses are slightly more trusted than big businesses.
Looking at company types, the study finds that trust in media companies rose from 52% of informed publics globally in 2012 to 57% in 2013. Within the US, trust in media companies crossed into the majority, increasing from 45% to 51%.