Empirical Rationalism and Other Oxymora
References & Book Reviews
Old Wine in New Bottles
Oct 20th
I was in a meeting a few weeks ago when I made an offhand comment about the emergence of customer-centric business models. One of my colleagues challenged whether or not is is actually a new phenomenon — isn’t all of this customer centric talk just “new wine in old bottles” he demanded? Over the past 10 years, we’ve gone through a wave of customer focused management trends — customer satisfaction turned to loyalty, and loyalty turned to retention, and now in 2006, retention has become willingness to recommend. Somewhere along the way, Peppers and Rogers’ 1to1 marketing got web-enabled and was called personalization; Seth Godin made marketing “viral”; and CRM became hot… not… and now hot again. So, I guess my colleague does have the right to ask “what is different this time”?
If you look at customer centricity through the lens of a PEST (Political, Economic, Social and Technology) trend analysis, I believe that there are several factors that are increasing the attractiveness and importance of customer centric business models:
- Political – Increasingly there are more and more restrictions on what you can do with customer information and how invasive you can be with your sales and marketing efforts (e.g. European data protection laws and US federal “do not call” registries), as well as an increased demand on record keeping requirements for businesses (e.g Sarbanes Oxley). Compliance with these laws is forcing businesses to keep better records. However, as an unintended consequence, these laws and restrictions are making companies more creative on how they use and capture customer information. Ultimately, I think the result will be a rise the quality of interaction between many companies and customers.
The Value of Dialog (On Blogging)
Oct 19th
I read an interesting article over at Knowledge@wharton today on blogging. In all, the article was fairly well balanced with both supporters and detractors. However, the detractor’s comments were the most interesting (in that elbow-patched academic sort of way). One detractor basically said he didn’t really read blogs because there is no way to validate the credibility of the writer in the same way that you can with established sources such as newspapers, magazines, etc. I think there is a fundamental misunderstanding of what the blogsphere is about. IMO, a blog is a conversation about a topic of interest — the same as you might have over a beer or by a water cooler. As such, it is and should be supplemental to other sources. Surely, he is not going to reference a water-cooler conversation in his next peer-reviewed journal article, but he may talk about his research topic with his peers. Have a look at techdirt; this business model is built around aggregating and commenting on topics of interest (for the general public on the blog and for private clients as a revenue generating business). This blog dosen’t replace the orginal sources, but it does analyze and comment on them. Also have a look at Chris Anderson’s Blog about writing his book The Long Tail. The blog didn’t replace the book, it was supplemental.
Lifestyle Brands vs. Brand Lifestyles
Oct 18th
How does a company like MySpace or YouTube go from nothing to a billion dollar enterprise in just a few years? In both cases, it can be argued that they have created a new market space (a Blue Ocean perhaps?). Putting aside the arguments about valuations and long-term sustainability for a minute, I think there is a deeper trend going on here. People are less interested in being aggressively marketed or sold to these days, but they will become active participants in the marketing process for the opportunity to express themselves.
MySpace and YouTube are built on the notion of sharing experiences online. However, these companies are becoming inextricably intertwined with people’s offline lives as well. During my wife’s last hair salon visit, the stylist’s boyfriend called and broke up with her because of something he saw on her MySpace site. The stylist was distraught and couldn’t stop talking about it (I can just imagine the look on my wife’s face as the stylist gesticulated wildly with scissors in hand!). Other people we know have met and fallen in love through connecting on MySpace. In politics, as Senator George Allen recently found out, pandering to one constituency quickly becomes a conversation with the entire country on YouTube. As more and more people are finding out, there is no differentiation between and online and offline personas. These are real-life events that will be forever associated with MySpace and YouTube.
This type of interaction with a company transcends the kind of “brand associations” that people have had in the past. The brand is no longer associated with a lifestyle… it is the lifestyle.
The Situational Meaning of “Quality”
Oct 2nd
“Quality” is such a loaded word. Often when customers complain about poor quality, I believe that they are really saying that the price/quality ratio does not meet their expectations. What they bought was not actually defective, but rather that they expected more for the amount that they paid. This problem ties directly into PPM1 — delivering the desired product or service. You need to understand what the customer wants and then look at the appropriate price for that experience. With understanding that quality expectations are a product/service attribute, you can begin to look at developing your products, services and internal procedures accordingly.
There is another interesting trend that is compounding this problem – consumer choice is not always congruent with affluence or purchasing power. (This trend was identified in Trading Up and Treasure Hunt by Silverstein). Consumers are trading up and trading down in their purchasing habits – ever notice how many Lexus’, BMWs and Mercedes there are in a Costco parking lot; or the student with salvation army clothes and $200 sunglasses; or the guy in a Men’s Wearhouse suit and a Rolex (well, maybe that guy is just a jackass)? No longer are you targeting a certain segment, but rather a certain segment looking for a particular experience. The meaning of “Quality” is situationally dependent in the mind of the customer.
Principle 5: Conflict Resolution
Sep 26th
Anyone remember the early 90′s movie Crazy People?… “Zony, No Baloney”. Anyway, let me tell you why I hate one of the leading consumer electronics companies. For the purposes of this post, let’s just call them “Zony”. A couple of years ago, I bought my wife a laptop from said company. She was doing her PhD at the time and wanted something that didn’t weight too much and that she could easily slip into her backpack. Figuring that laptops were pretty much commoditized, I went and bought the lightest model I could find. It cost about $800 dollars and worked great for about a year, although it ran a bit hot for the last month or so. Eventually it began to overheat and shut down. We sent it back to Zony one week after the warranty had expired. Turns out that the fan had died and would need to be replaced. Because this model was so small, the fan was integrated with all of the internal components. If we wanted to replace it, we would need to replace the entire motherboard – and they would be happy to do this for only $750 dollars. After being told that I should have bought the extended warranty to cover what I believed should be a $12 part, I gave them a few counter-suggestions. Not satisfied with the situation, I wrote a detailed letter outlining all of the Zony purchases that I have made in the past and dollar-value of likely future consumer electronics purchases. It amounted to be $20-30,000 lifetime. I sent the letter to the office of the CEO, VPs of Customer Services, etc… Guess what, no response. Now I just tell everyone who asks my opinion (and some that don’t) about how mad I am over a $12 part from an experience three years ago. Maybe I was wrong about the initial situation, but the inflexibility and the lack of response is what sticks with me.
So, imagine my surprise and amusement that the new Zony CEO has announced that they are going to pursue a customer-focused strategy. Do I believe for a second that they are going to get this right, or is the “bad profit” ethos (as Reichheld calls it) too far ingrained into the business. Maybe I should change the “z’s” to “s’s” and see if I get a C&D letter?
The fifth PPM is having a conflict resolution mechanism that is fair to both the customer and the business. You obviously can’t give away your products, but when conflict inevitably arises it has to be dealt with in such as way that people aren’t blogging about their experience three years latter.
