Staying Alive While Providing Consumer Information: the Vector Enterprises Solution

ABSTRACT - This paper traces the six-year history of Vector Enterprises, Inc., a private firm engaged in the publishing and television production of consumer information. Problems confronting consumers in acquiring consumer information are discussed and plans for the development of a computerized consumer information storage and retrieval system for cable television subscribers are presented.

Citation:

Russell L. Smith (1980) ,"Staying Alive While Providing Consumer Information: the Vector Enterprises Solution", in NA - Advances in Consumer Research Volume 07, eds. Jerry C. Olson, Ann Abor, MI : Association for Consumer Research, Pages: 246-249.

Advances in Consumer Research Volume 7, 1980     Pages 246-249

STAYING ALIVE WHILE PROVIDING CONSUMER INFORMATION: THE VECTOR ENTERPRISES SOLUTION

Russell L. Smith, Vector Enterprises, Inc.

ABSTRACT -

This paper traces the six-year history of Vector Enterprises, Inc., a private firm engaged in the publishing and television production of consumer information. Problems confronting consumers in acquiring consumer information are discussed and plans for the development of a computerized consumer information storage and retrieval system for cable television subscribers are presented.

INTRODUCTION

It has often been said that consumers comprise the real power in America. Such a statement is unrealistic. Consumer power is latent or potential in nature but it has never been exercised in any systematic way. Moreover, there is good reason to believe that it will never be exercised systematically, simply because it lacks management, organizational structure and financial support. Perhaps the major problem is that consumers themselves have shown little interest in supporting such an organization. Without monetary support, there can be no effective power base.

Despite this rather pessimistic description of the so-called consumer movement, Vector Enterprises, Inc. has thus far succeeded in weathering the storm that has drowned so many other private consumer oriented organizations. However, such success has been proportional to the degree to which we have moved away from direct interactions with consumers. While our products and services were initially supported entirely by consumers, today that support represents three-tenths of one percent of our income. Yet, our exposure to consumers has increased by a factor of 250. A little history of our six year-old organization should explain what might appear to be something of a paradox.

The Beginnings

Vector Enterprises, Inc. was formed in early 1973 by a group of scientists who had an idea that many said couldn't fail. The idea was a 12-page, weekly publication called Consumer Newsletter which contained informative and cost-saving information, including a detailed listing of prices of 150 food and sundry items at 20 supermarket chains in Los Angeles. This listing was referred to as the Comparison Shopping Guide.

Since the newsletter's price was only $12 for 52 issues, we assumed that we could easily acquire at least 20,000 subscribers in Los Angeles alone and perhaps another 5,000 elsewhere. However, our circulation never rose above 2,000 and by the end of 1973 we concluded that the newsletter would probably never pay for its own costs, let alone show a profit. We therefore pointed the corporation in another direction, still retaining the Newsletter as a visible consumer product of our firm.

In September of 1973 we negotiated with a cable television company in Los Angeles to produce a computer-generated automated program called Consumer Shopping Guide. In effect, it was the core element of Consumer Newsletter but presented in a different format. However, limited consumer information other than food and sundry prices was also included in the program.

Income from the cable TV company, the nation's third largest, was barely sufficient for offsetting the costs of producing the program and the newsletter. Even so, that represented a major economic advancement for our organization. While other consumer oriented publications in the country emerged and died, we managed to survive. However, the survival was tenuous at best. Our hopes of acquiring other cable television customers were slowly dashed by the gradual recognition of the fact that the cable industry was heavily in debt and in no condition to support the Shopping Guide program. It is to be noted, in this regard, that while the program was and is quite inexpensive in comparison to commercial television programming, it was quite another matter for the cable industry which has not had the lucrative income from sponsors that commercial television has enjoyed.

Vector Enterprises, Inc. grew quite modestly through 1974 and 1975. A significant upturn occurred in January of 1976 with the acquisition of two cable company customers in Long Island and San Diego. In 1977, three more customers were acquired--Manhattan, Oakland (New Jersey), and Honolulu. Four more were added in 1978--Topeka, Arlington, Norfolk and Westchester (New York). At the time of this writing, we have either initiated the Shopping Guide or are in the process of doing so in 11 new cities throughout the U.S. In addition, we are currently negotiating with more than a dozen others for start-ups in 1980.

No Bed of Roses

Operationally, the production of Consumer Shopping Guide has not been all fun and games. The nature of the program is such that a great deal of price data must be obtained in the various cities, transmitted to our offices, computer processed and formatted, and than re-transmitted to the local cable television companies within the space of eight hours on a prescribed day of the week. A war-like atmosphere exists following the resolution of an untimely computer breakdown.

Of no little insignificance also are the complaints by and threats of lawsuits from food markets that are included in Consumer Shopping Guide. Because the program tends to counter their media advertising, markets are understandably disturbed. When a market claims to have the lowest prices in town and is simultaneously shown to be one of the highest priced markets, its immediate response is to find fault with the program and/or its producers. However, serious complaints by markets are never substantiated and reluctant acceptance of our program is exhibited within a few months. The cycle is almost invariably repeated for each city we initiate the program. It is important to emphasize that only a relatively few markets complain. Indeed, most markets have either remained silent or demonstrated enthusiasm. Clearly, the program represents the best form of advertising for the lowest priced markets--and it costs them zero dollars.

New Directions

The cable industry has undergone severe instability during the last 10 years. In the late 1960's and early 1970's all forecasts were various shades of gloom. Debts were substantial and subscriber growth was nothing to shout about. Individual cable companies scrambled for innovative, low-cost programming to entice new subscribers. The advent of pay television (relatively new movies and live sports events) and multiple channels for automated information programs offered great promise and, in fact, subsequently rescued and totally rejuvenated the industry. Today it is rapidly moving toward its eventual position of replacing commercial television as the major medium in the country. There are currently more than 6,000 cable companies and the number is growing virtually every day.

Needless to say, while the staff of Vector Enterprises initially demonstrated the same degree of naivete as so many others before us in assuming a positive response from consumers, we learned a great deal over the years. Despite the growth of our Shopping Guide customers, we began moving in other directions. In late 1977, we established a research division and achieved immediate success in gaining government research contracts and industrial work. We proved once again that success of our firm was inversely related to serving consumers in direct fashion.

An Overview of Services

As previously noted, our original service to consumers was Consumer Newsletter. In addition to information and food price data, we also published monthly surveys of prescription drug prices. Furthermore, we assumed an ombudsman role with respect to our subscribers, taking on all legitimate complaints against a variety of companies. Under the threat of publishing the complaints, we resolved each to the satisfaction of our subscribers in virtually all cases. However, the cost of this free service became unmanageable and it was eventually terminated.

On the other hand, the prescription drug surveys subsequently evolved into a second automated cable TV program. Currently, we are preparing a third which will represent the TV counterpart of the other elements of Consumer Newsletter, namely, informative and cost-saving information on health, taxes, nutrition, law, food and a host of other topics. Because cable customers have shown considerable interest, we anticipate the syndication of this program in early 1980.

THE STATE OF CONSUMER INFORMATION

The publication of Consumer Newsletter necessitated the development of a clearinghouse for consumer information. In addition to receiving all of the standard publications from various federal, state and local government agencies, we acquired materials from a wide variety of sources, including consumer groups, physicians, lawyers, industries, special interest newsletters, newspapers and magazines, trade publications and books. Our education was rapid and we soon learned to differentiate between the biased and unbiased information and between the useful and unuseful publications. We were, of course, wrong on occasion and published articles that we would like to forget. Such are the pitfalls of the learning process.

Without a doubt, consumers are badly informed on issues which directly or indirectly affect their well-being and pocket books. In fact, it is more realistic to say that they are grossly ignorant. And yet, there is an incredible abundance of information which, if properly made available to consumers, would increase their capabilities of coping with society at least ten-fold. The problem is that the useful information is widely scattered and costly to acquire. The time required to obtain and read the relevant literature is far greater than that which the average consumer would tolerate. Of equal importance also is the likelihood that most consumers would not be able to discriminate between true and false or misleading information.

There are no theoretical or technical problems of acquisition and transmission of useful information to consumers. The channels of communication are in relative abundance. The real problem is that no medium has elected to transmit such information. The reason, of course, is obvious. The media customers are advertisers, not readers, listeners or viewers. Articles and programs are designed to increase exposure in order to augment advertising revenues. Many newspapers sell their editions well below cost and radio and television receives no reimbursement at all from listeners and viewers. Thus, advertisers control the media in indirect ways and advertisers abhor consumerism.

Consumers really do not know the extent to which they are being manipulated. That is the essence of their ignorance. False or misleading information emanating from government, industry and general advertising is so prolific, it must be described as a generalized conspiracy to defraud the consumer. And because it has existed for so long, it must also be described as a normal characteristic of our society, albeit an undesirable characteristic from the standpoint of consumers.

Some Examples

Consumer ignorance derives from both false and misleading information and the purposeful withholding of valid information. I would like to present a few examples of these techniques which dramatically illustrate the magnitude of the problem confronting consumers.

Almost everyone in this country is periodically checked by his doctor for blood cholesterol level. Even quite old individuals, including the senile and seriously brain damaged, undergo this examination routinely. It costs consumers about $10 per examination, a relatively small amount per individual but a very handsome sum for the health care industry as a whole. Taking advantage of the cholesterol scare is the polyunsaturate oils industry which promotes its products as reducing blood cholesterol and protecting against heart disease. Naturally, its products cost more than the conventional varieties. And because consumers wish to avoid heart disease, they are outlaying another staggering sum in the widespread purchasing of polyunsaturated foods.

If one were to ask 100 people at random if they thought cholesterol was linked to heart disease, at least 97 would probably answer in the affirmative. Yet, there never has been nor is there now any scientific evidence demonstrating that cholesterol is a contributor to heart disease. Moreover, there is only weak evidence linking diet with blood cholesterol and much more evidence which shows that blood cholesterol is unaffected by typical diets. Even more important, there is increasing evidence from researchers world-wide that imbalancing one's diet in favor of polyunsaturate oils may increase the incidence of cancer.

Despite the fact that the federal government recognizes that there is no evidence linking cholesterol with heart disease, it has nevertheless played a major role in perpetuating the notion and, therefore, in maintaining the steady flow of money from consumers to the health care industry and polyunsaturate foods industries. How has it accomplished this feat? Simply by allowing the polyunsaturate foods industry to make unsubstantiated health claims in their advertising and forbidding other industries whose products contain saturated fats from advertising the fact that no evidence exists linking their products with blood cholesterol or heart disease. This discriminating advertising policy by the Federal Trade Commission is costing consumers billions of dollars--and perhaps a few years of their lives.

Less emotional but even more dramatic of fraudulent advertising are the useless breast enlargement and hair growth substance ads that have appeared in every issue of numerous women's and men's magazines for decades. Add to these the many hundreds of other false advertisements and it is easy to comprehend why consumers are being conned out of more billions of dollars.

Another good example of consumer manipulation and ignorance is related to the income tax system. It is presented in an overly complicated manner and is, not so surprisingly, quite incomprehensible to the average consumer. As a consequence, the typical consumer usually pays more taxes than the law requires.

In actuality, the income tax law itself is not terribly complicated. As emphasized, it is the way it is presented to consumers that makes it appear complicated. Since there are all sorts of professionals who specialize in education and communication, it cannot be said that expertise is lacking in making the income tax system verbiage more understandable. It can be said, however that there is a notable lack of motivation to do so. After all, the more the consumer is educated, the fewer taxes he will pay--and that seems hardly a goal of lawmakers.

Of course, all consumers are not penalized by ignorance. Those of higher income manage to acquire the service of tax experts and, subsequently, pay relatively fewer taxes than their less wealthy counterparts. And some very high income individuals find themselves in the most enviable position of all--the payment of no income taxes at all. It is all a matter of education.

A final example of misleading information that is presented by industry and facilitated by government is the U.S. Department of Agriculture's grading system. For example, Grade AA eggs are said to be of higher quality than Grade A eggs. The fact is, however, that both are of the same quality and nutritional value. They differ only in the extent to which the white content spreads out when poured onto a flat dish. Another example is the grading of beef. It is said that "prime" is of higher quality than "choice," and that the latter is of higher quality than "good." Yet, the principal basis for differentiation among sides of beef is fat content. The higher the fat content--more exotically referred to as "marbling" by the industry--the higher the grade. In effect, a consumer pays more for a higher grade but receives less protein and nutritional value. He thinks he is purchasing a higher quality meat but he is actually buying more fat.

In reviewing the above examples, the careful reader should detect a contradictory stance by the federal government with respect to its influence on consumers. On the one hand, it is directly and indirectly encouraging consumers to eat less red meat and thus less saturated fat. On the other hand, it promotes the consumption of higher grades of beef which, of course, contain greater amounts of saturated fat. And in neither case does it have scientific or otherwise justifiable evidence to support its claims. Frankly, we are convinced that the validity of claims has nothing to do with their purposes, namely, to satisfy powerful industries.

Suppose a consumer follows the government's advice by consuming higher grades of beef and washing it down with polyunsaturated fats to maintain the same blood cholesterol level. To counteract the saturated fat in an eight-ounce porterhouse steak, he would have to consume six to 11 ounces of polyunsaturated oil margarine, depending on the brand. That's 37 and 69 percent, respectively, of a pound of margarine, containing a minimum of 1,440 and a maximum of 2,640 calories. Such a diet would be absurd, to say the least.

Summing Up

There is virtually no end to a potential discussion describing the difficulties confronting consumers in gaining relevant information. Whether we wish to believe it or not, the government/industry/media system is designed to keep consumers ignorant for self-serving reasons and it perpetuates the structures and processes to ensure a steady flow of money from consumers to controlling factions.

An abundance of consumer information is available. If any of the media or branches of government truly wanted to remove the blindfolds from consumers, they have all of the necessary communication channels for doing so. It is, in my opinion, naive to say that this statement is an over-simplification of a complex problem. "Oversimplification" and "complexity" are terms typically used to dismiss or bury an issue. It is not a complex problem technically; rather, it is an economic issue of monumental proportions, the solution for which, as exemplified by the behaviors of the controlling factions, is to do virtually nothing.

BUILDING A CONSUMER INFORMATION SYSTEM

Because we are reasonably convinced that neither the government nor the major media have any real motivations or plans to institute a formal consumer information system, we have been preparing plans for the development of such a system within the context of the cable industry. As noted, our Consumer Shopping Guide program provides some consumer information other than food prices. That program currently reaches about 500,000 households and the number is expected to double in 1980. Our Consumer News program will represent a major step in the development of both a data base and a storage and retrieval system. Not only will it be exclusively oriented towards supplying needed information to consumers, it is being structured as an accessible data base. Ultimately, such a system will be compatible with the capabilities of the cable industry whose technology now permits viewers at home to interact in two-way fashion with the computers of individual cable companies. In effect, a viewer will be able to interrogate a computer via a portable terminal in much the same way that a person uses a library index system and subsequently obtains a desired book. However, in the present case, the information a viewer seeks will be displayed on his television screen.

The potential of the cable industry, with respect to the development and use of consumer information systems, is enormous. However, it should be emphasized that the industry is no more dedicated to serving the best interests of consumers than are the commercial media. Its motivation derives from the need to be competitive with the commercial media--and with the new, over-the-air, commercial-free pay television services. In order for the cable industry to succeed, it must provide services which can be obtained only by direct cable transmissions. Such services would include a variety of information channels, accessible by demand, and, ultimately, a large data base of consumer information available to viewers by two-way communication devices.

The development of a consumer information storage and retrieval system for the cable industry can be accomplished now. However, just as there was little money available for developing programming during the dawn of television, there is also little money available for the development of a consumer information system. While outside sources such as Vector Enterprises can generate the actual data base and perform all required software activities, there remains a need for a large computer system with considerable memory. Few cable companies can currently afford such equipment costs individually. On the other hand, a powerful trend is occurring whereby individual cable companies within a relatively broad geographical range are working together to supply all subscribers with common programming services without duplicating equipment costs. Only one company need have a computer. That company supplies programming to other companies by microwave transmissions. Since the cost of microwave receivers is relatively insignificant, the shared cost of the computer system becomes quite feasible economically. Thus, it is conceivable that the first consumer information systems could go into operation within the next several years, given the industry's desire to do so.

Developing the Data Base

I have noted that there is an abundance of consumer information available, albeit scattered and often imbedded in excessive verbiage. It is not enough, however, to simply acquire, format and store it in a computer system. As I have emphasized, consumers are constantly bombarded with false or misleading information, as well as valid and relevant information. Expertise must be available for screening the information and determining its value and validity. Such expertise must involve the disciplines of medicine, economics, law, psychology, nutrition and many others. Unfortunately, the need for such expertise is not well recognized. Most consumer educators in this country are ill-equipped to perform the screening task and often perpetuate the dissemination of erroneous information themselves.

It takes a tax expert to wade through the tax laws to find the loop holes. It takes a research physician to determine what is and what is not quackery in medicine. And it takes a lawyer to know what a consumer can and cannot do under the law. No one with a teaching credential in such generalized curricula as home economics or consumer education is capable of adequately differentiating between the sense and nonsense that is, in fact, the state of consumer information. Contrary to popular opinion, consumer information is not common sense. In today's world, it is uncommon sense and it takes an expert to find it.

In my opinion, the appropriate expertise will not be employed in the development of early consumer information systems. One reason for this belief follows from the preceding discussion, namely, that there is a general unawareness that false or misleading information emanates from respected and traditional sources. Ail too often, information is assumed to be valid simply because it derives from a respected source. A second reason relates to the cost. Even if the developers of consumer information systems are well aware of the state-of-affairs, it is not likely that they will invest the monies necessary for employing the services of a wide variety of experts. In effect, then, I do not view the early systems as comprising a giant step toward educating consumers. Nevertheless, I do believe they will represent a step in the right direction.

In the meantime, Vector Enterprises, Inc. will continue to provide consumer information programming for the cable industry in areas for which we have some degree of expertise. With the advent of Consumer News, we hope to expand that expertise and initiate the development of a consumer information storage and retrieval system.

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