Tuesday, December 28, 2010

Indifference to Usability

Convincing IT and business that usability is important can be difficult: the notion that the customer is in control, and can click away to a competitor at any moment if he finds your application to be confusing or difficult, seems self-evident, but my sense is that it goes against decades, even centuries, of past experience.

From the IT perspective, usability was never an issue before the Web because of the way in which their business model worked: by the time the user encountered any difficulty with a software application, he had already handed over his money and had to deal with the product. In the consumer markets "no refund if the box has been opened" was a standard; and in the business market, it would be difficult for an executive to admit he had made a very expensive mistake in buying software that was no good.

As such, consumers were faced with a choice, learn to deal with the user-unfriendly aspects of the software they had purchased, or pay out again in hopes that another product would be better. Most chose the former, and as such the software industry came to take it for granted that they could turn out a mediocre product and customers would accept it.

The business perspective is little better: until the industrial era increased competition, the consumer's choice was to buy from the one-and-only purveyor of a good or do without it. So long as they were willing to pay the price, retailers had no reason to believe it was too expensive, and so long as they were willing to suffer poor service, retailers had no incentive to do any better.

Even after the industrial era, retail remained notoriously customer-hostile. Once a customer invested the time and effort to travel to a retail location, he faced a choice between accepting poor service or taking the time and effort to go somewhere else - and generally chose the former, as there was little chance of getting better treatment.

The Web largely changes this: if a Web site is flawed, either in terms of its core functionality or the level of service it provides to the customer, the competition is just a click away. The customer is no longer constrained by a lack of options, or the difficulty of leaving the "store" and going elsewhere if anything about the experience is not to their liking.

And yet, these two factions remain mired in their traditional mid-sets - in spite of the consequences, and blind to the fact that the sites that lead the field in every category are those that are customer-focused.

Given that the consequences of indifference are now visited upon the indifferent, perhaps it's only a matter of time before they realize the consequences of their complacency. However, it's taking much longer to sink in than one might expect.

Friday, December 24, 2010

Abandonment Issues

While shopping online, a Web site attempted to mouse-trap me - something that hasn't happened in quite a while. What makes it worth noting is that they did so because I had added an item to a shopping cart, then saw that they wanted an outrageous amount for shipping and handling, so I decided to leave. Immediately, a JavaScript window popped up.

There are items in your shopping cart.

I clicked "OK" - as if to say, "Yes, I'm aware of that, and I want to leave anyway." But I was stuck on the page. So I figured clicking "cancel" was the correct thing to do. I was still stuck. So I removed the item from the cart and tried to leave. Nope. In the end, I had to disable JavaScript to close the window and get away from the site.

Skipping past the notion that mouse-trapping a user is evil, I had a sense of the reason they were trying to do this: studies suggest that a very large percentage of shopping carts on e-commerce sites are abandoned - people leave without completing the sale, and this upsets and perplexes online merchants, who are desperate to find a solution.

My sense is that in trying to remedy a short-term problem, an online business is creating a far more serious long-term problem: they are damaging trust. In this instance, I don't think they are gaining much by doing so - there may be a few people who accidentally closed the window, and would be thankful the site prevented them from doing so, but far more people intended to leave - and hijacking the browser will only serve to ensure that these same users won't come back.

In my case, I was able to find the item elsewhere - at a slightly higher price, but free shipping - but had I been unable to do so, I don't expect I would have gone back to the same merchant, even if I was resigned to pay the shipping price. Chances are, a company that resorts to mouse-trapping to force a user to complete an order is going to behave in other ways that are offensive and self-serving. Or maybe not, but given the experience, I'm not willing to take the chance.

It occurred to me that users may visit a Web site to research product information before making a purchase. I've found a few sources that suggest a number, but none of them present a credible case for their estimate. I suppose there aren't any reliable statistics on this behavior, as it would be difficult to determine if a first-time buyer had abandoned the site previously - which is rather a shame, because if merchants were aware that "a person might visit your site five times before making a purchase," perhaps they would be a bit less distressed buy shopping card abandonment, or at least they would realize that it isn't the end of the world ... unless they mistreat the customer.

Or more likely, merchants would still see this as a problem, and seek out a consultant who could promise them a solution that would reduce the number of visits before purchasing. But my sense is, this would still result in an infinitesimal improvement to short-term sales, and it would still come at the cost of damaging the potential for more long-term engagements with customers who weren't ready to buy immediately, but who might return at a later time.

I've had meatspace encounters that are roughly analogous, generally with high-ticket items (cars and major appliances) where commissioned salesmen, in their attempt to pressure me to buy immediately, behaved in such a way that I didn't come back when I was ready to purchase.

If there's any larger lessons to be learned, it's that customer trust isn't a guarantee and, depending on the cost of the item or the convenience of switching vendors, it may take a few visits before a prospect will be comfortable enough to make a purchase - and until they reach that point, any action on your part to "make" them trust you enough to give you their business seems likely to have quite the opposite effect.

Monday, December 20, 2010

Still Waiting for Mobile

In 1999, I went to a conference held at San Francisco's Moscone Center where a few thousand practitioners in the new Internet channel, just over five years old at the time, gathered to share information and learn from the cutting-edge gurus. I went to a session on "mobile computing" and left with the distinct impression that the speaker was out of his mind.

He was cartoonishly enthusiastic about the mobile channel, at a time when display capabilities were limited to two rows of text, sixteen characters wide, and the input was limited to twelve buttons. Even so, he insisted that within two or three years, the computer would no longer be the device through which people accessed information: it would be the cell phone.

Fast forward to the present day, and such a claim seems quite a bit more credible: the "smart phone" and wireless data networks have transformed the cell phone into a viable computing device. It's still limited in its capabilities, but it's gained considerable ground and is continuing to evolve. Even so, I'd say that "two or three years" is aggressive, and there are a lot of obstacles that need to be overcome.

The device remains primitive, but my sense is that will be addressed soon. There are no reliable standards for mobile device development - so development is costly because a separate application for each platform (iPhone, Android, and Windows) must be built, and I don't sense that will change in the near term. And the cost to users is still high (it can cost $1,500 per year for a phone with a reasonable data plan) while the benefit is too low to justify the occasional and frivolous benefits of ownership - and the cost is not decreasing at the same rate as previous technologies (in fact, it doesn't seem to be decreasing at all), so it will be a while before it's worthwhile to the mainstream.

All things considered, the mobile channel has come a long way over the past decade - but I maintain that there remain a number of challenges to widespread adoption that will take several more years to overcome.

Thursday, December 16, 2010

Backward Approach to UX

I recently abandoned a book in which the author referred to the approach to deriving business requirements should be done "from the inside out" - that the operator of a Web site considers their objectives first, and then decides what the site visitor must do to serve their interests. The author's take is that this is an efficient method for determining software requirements, as it eliminates all the "bells and whistles" that are not necessary to develop a site that delivers its core value to the firm that operates it.

Something about this notion strikes me as being fundamentally wrong - or more aptly, everything about this noting strikes me as being completely wrong, and completely backwards from the way the task ought to be done.

I can't argue that a great deal of complexity is added to a development project by the demand for additional "nice to have" features that, while extraneous to the bare-bones functionality, are nonetheless valuable to the user. And especially when it comes to Web sites, where the user has the option of leaving the site and turning to another that better serves their needs, bare-bones functionality is not only insufficient, but detrimental to the long-term success of the site.

Were the same principle applied to any other aspect of business, the result would be disastrous: determining what the company is willing to deliver, then paring away everything else that the customer might want in the name of efficiency, is not an approach that is likely to result in success.

In effect, this advice is merely a rehash of an outdated business model that hearkens from a time when goods were scarce, and the customer had little choice but to accept whatever the (single) provider of a given good or service was willing to provide.

It's simply not suited to a competitive environment, or even a service mentality. Success in online business is not achieved by limiting what the customer is able to do on your site, but in discovering what the customer wants to do, and empowering them do so.

And so, I've no intention of reading any further - but take from the experience one valuable lesson: don't let IT professionals drive user experience design ... they simply do not "get" it.

Sunday, December 12, 2010

Industry Standards

Lately, I've been assaulted from several angles with the phrase "industry standard." I have heard this phrase uttered at least a dozen times in the past few weeks by people who either are utterly lacking a sense of irony, or who believe that being "industry standard" is something they feel gives them a sense of pride, rather than a sense of shame.

To proclaim that your product meets standards would seem to be a claim of quality, but my sense is that customers have largely learned that "our product meets government standards" or "industry standards" is nothing impressive. In effect, a claim of meeting standards is a declaration that "we are doing the absolute minimum we think we can get away with."

Government standards were put in place because of widespread problems in a given industry - to the point that their products were so shoddy that they constituted a danger to the public. And industry standards are little better - they are generally established as an attempt to prevent government standards from being created by setting a minimum level of quality to which individual manufacturers could voluntarily comply.

And further, compliance to industry standards creates commoditization of goods and services. If every company's product merely meets standards, none is better than any other, and the customer is left to choose on price or convenience. And while the intention of standards may be argued to have been ensuring products meet a certain minimum level of quality, the effect is that they also ensure that companies are discouraged from doing better.

With this in mind, it doesn't make much sense for a company to set a goal of merely meeting standards, nor does it make sense for customers to accept a product that merely does the absolute minimum that it is required to do in order to avoid being legally penalized.

Granted, that may be a political point rather than a practical one, but it does identify an opportunity for a firm to gain competitive advantage: the firm that breaks away from the informal cartel of standard-compliance has a distinct advantage over those that seek to merely comply.

Wednesday, December 8, 2010

Business and Personal Relationships

Four separate conversations with colleagues about my last blog post (customer neglect) took the same odd turn. It started out with a discussion of customer loyalty and, at some point, the conversation evolved or abruptly switched channels to a personal relationships - specifically, dating and marriage. And it struck me that there are many similarities, such that it is a natural metaphor.

A person who is unmarried and unattached puts a great deal of effort in making themselves appealing and announcing their availability and communicating their interest in pursuing a relationship. In the same way, companies spend a lot of money advertising their products and services to the general public, hoping to catch attention and get someone to pay attention them, as a precursor to making a sale.

After that, there is the first date, and the person goes all-out to present an attractive package and be on their best behavior to make a lasting positive impression that will lead to a second date, then a third, and so on. And in the same way, a company that has gotten the attention of a prospect will take pains to behave in a way that they feel will impress the customer that they will be well-treated if they enter into a long-term relationship with the company.

(And as one colleague was quick to mention, some companies are out for a one-time sale, much as some people are out for a one-night stand, with much the same consequences when the customer figures this out and tells other customers what will happen if they deal with this same company.)

Provided that all goers well on the first date, there will be a second, and a third, and so on, as the relationship develops to the point where the relationship becomes exclusive. And in business, the customer who is satisfied with the experience of dealing with a company will return to them, and decrease the amount of business they give to the competition.

And after a while, the couple's commitment to one another gets to the point where they are ready to make a formal commitment to a long term relationship: i.e., marriage. There doesn't seem to be an equivalent ritual in the customer-vendor relationship. Arguably, it could be the point at which the customer signs a long-term contract with a vendor - though this is sometimes required by the vendor even for a "first date" (and it's worth noting that many companies are abandoning term contracts in favor of pay-as-you go programs, with an option to sign a contract at a later time), or in other industries there is no contract at all (though a customer's repeated purchases over time might be considered to be the equivalent of a common-law marriage).

Problems can occur at any moment in a relationship: it may be that a person discovers that the other party misrepresented themselves in the early stages - they are not really the person they pretended to be when they were dating - or perhaps they merely feel neglected or taken for granted. The same can be said of customers, when a business makes promises it doesn't deliver on during the time when they're pursuing the business, or when the level of care and attention paid to the customer diminishes over time.

And in a troubled relationship, a person might consider whether they have made the right choice. The prospect of breaking up and starting a relationship with a different person (perhaps even someone who is pursuing them) becomes increasingly attractive, and they may eventually begin seeing someone else "on the side." In much the same way, a customer who is dissatisfied or feeling neglected is constantly subjected to the advertising of competing firms that seek to win them away with promises of better treatment, and they may eventually be convinced to try another product, and move some portion of their business to the other firm.

If the relationship isn't mended, it is eventually abandoned: the couple stops dating, breaks up, or gets divorced. From a business perspective, this is the point at which the customer stops purchasing from the firm. It is probably much less dramatic than the end of a personal relationship, but I expect that the ex-customer, much like an ex-spouse, harbors feelings of resentment.

But on the brighter side, not all marriages end in divorce - many people remain happily married "for life." And in these instances, it's generally found that both parties have worked at maintaining the relationship and sustaining the romance - it doesn't "just happen," but requires constant attention and effort. And I suspect that, in the world of business, a company that has managed to maintain long-term customers often does so not because of customer complacency, but as the result of constant effort to ensure that the customer is happy with them, all along.


This has gone on a longer than I had imagined - and perhaps I'm chasing down a metaphor at this point - but because the exploration has sustained my interest and sparked additional parallels, I have the sense that it's an apt metaphor, and it may be worth looking into some of those insipid self-help titles on personal relationships with an eye toward their applicability to the vendor-customer relationship ... though it may be some time before I can muster the patience to undertake that task.

Saturday, December 4, 2010

Customer Neglect

I can understand, or at least tolerate, that businesses are complacent about churn when it comes to new customers they're notoriously fickle: : a person who purchases a given brand could well be seeking a substitute because they are unable to purchase their regular brand "this time" and are not likely to become regular, loyal customers. However, when long-term customers churn out, it requires greater consideration.

A long-term customer tends to be less demanding and more forgiving. So long as the product, the cost, and the buy/service processes are consistent with their previous experience, they tend to be satisfied enough to repurchase, even if there are occasional or minor shortcomings. And even if there's a "major" problem, they generally will be forgiving if their supplier makes amends.

In order to lose a long-term customer, you have to have done something very wrong - or have at least done a lot of things poorly over a long period of time - such that the customer is shaken from their complacency enough to seek out a different provider (or to be susceptible to the overtures of a competitor).

The problem is not that this is a false perception, but that it is a valid one: vendors have the impression that existing customers can be taken for granted precisely because the customers will continue to give them their business, even when problems arise, and even when quality of service declines.

Said another way, the business is complacent because its customers are complacent. There isn't any need to work very hard to keep a customer, and doing "more" for the customer doesn't contribute a dime to profitability - from a cost-benefit perspective, it's wasted expense. And I don't have the sense that it can be argued otherwise, based on short-term financial results.

But over the long term, customer neglect leads to customer attrition - and attrition of the worst kind: the loss of long-term customers who are more profitable and more critical to the long-term success of a firm than the fickle "new" customers.

Research done in this area, whether surveys of new customers or lost customers, has been frustratingly inconclusive. Most defectors express that they were satisfied with their "old" provider and cite no specific reason for leaving. This would seem to reinforce the perception that customers are "just fickle" - which, in turn, reinforces the perception that there is nothing a company can do to prevent customers from defecting - so why bother?

However, I'd submit that this, itself, is the problem: companies are indifferent to their existing customers, take their business for granted, and do nothing to maintain their loyalty. And this is what makes it so easy for competitors to lure them away.

The example that comes to mind is the "low introductory rate" offered by credit card companies. It's a fairly common anecdote that the offer is sent to an existing customer, who calls the company to ask if the discounted rate can be applied to their existing balance - only to be told that the special rate is for "new customers only." Can there be any more blatant way of declaring that the existing customer is being taken for granted?

But of course, this would constitute one of the rare occurrences when the customer would leave their existing provider for a different one, and would be able to cite a very specific reason for having left. And it would also contribute to another common misperception: that customers are not loyal, but only care about price.

My sense is that most companies are savvy enough to avoid acts of such spectacular stupidity as to blatantly declare their indifference to loyal customers, right to the customer's face - but over the long run, neglecting the customer in lesser ways, on a more regular basis, can be just as damaging to customer loyalty.

As a result, the reasons for customer attrition are harder to identify. A customer can't cite a reason for being dissatisfied, but has a more deep-rooted sense of dissatisfaction that is more difficult to identify, assign, or quantify. It's more of a slow leak than an instantaneous blowout.

The quality of service customers receive from their existing provider isn't something that springs to mind when asked why they made a change - in fact, it was a "typical" level of service that they became accustomed to accepting. There's no specific reason they can give for being unimpressed, and they don't even feel it's fair to say that the service was unsatisfactory.

As such, it's more difficult for researchers to identify, and far more difficult for companies to address, than the few, obvious instances in which customers could cite a specific reason for leaving. So in the end, a company that seeks to retain customers for the long term will need to pay a bit more attention to the 70% to 90% of defecting customers who express no dissatisfaction with their service, and look a bit harder for a satisfactory answer to the problem of customer neglect.

Tuesday, November 30, 2010

The Persistence of Brick and Mortar

The holiday shopping season is upon us, and the same question seems to come up in every conversation: "who goes to a store anymore?" Given the number of cars in the parking lots of most stores, and the traffic congestion around most retail clusters, the answer seems to be "quite a few people, actually."

This got me to musing about the brick-and-mortar retail industry, which e-commerce pundits have repeatedly declared to be a dead or dying channel, citing a few instances in which online commerce has effectively killed off brick and mortar (travel agencies, record stores, video rental). And yet, brick-and-mortar merchants persist.

It stands to reason that the advantages of the channel are still valued buy a significant number of consumers. And with that in mind, I've been musing on what those advantages might be - and have come up with a fairly good list:

  • Immediate Possession
  • Convenience of Browsing
  • Inspection of Physical Goods
  • Total Cost of Goods
  • Customer Service
  • Payment Flexibility
  • Privacy
  • No Spam
  • Merchandise Returns
  • After-Sale Support
  • Customer Experience

Granted, some of these qualities are arguable, and many of them could be argued either way based on factors such as customer preferences, the item in question, or the vendor in question - and this may bear further reflection at a later time. I could probably write a blog entry on each of the items in the list but for the present one, my intention was simply to do a quick brain-dump of some of the factors that might lead a customer to prefer a brick-and-mortar outlet to online retail.

Friday, November 26, 2010

Does Satisfaction Guarantee Loyalty?

I noticed an interesting statistic today, that 80% of "new" customers reported that they were "satisfied" or "very satisfied" with the seller or brand that they had just left. This flies in the face of conventional wisdom, that a satisfied customer is a loyal customer - after all, if their experience was satisfactory, they should have no reason to switch. The eighty-percent statistic also seemed hyperbolic, so I did a bit more research.

From what I was able to find in other sources, the statistic might be exaggerated, but probably not by much. I found a dozen or so references, and most of them were in the range of 60% to 80%, though they defined "satisfaction" in various ways, so I doubt that there can be an agreement on a precise number ... but all the figures I saw were very high.

There is a fundamental difference between the two, which seems entirely rational: satisfaction pertains to the attitudes about a past behavior, whereas loyalty pertains to the attitudes that will influence a future behavior.

And so, a customer who reports being "satisfied" is reflecting on a choice he made in the past and is being asked, in effect, if that choice was an error. This might be a part of the reason that ratings and reviews are overwhelmingly positive, and tend to be egocentric (see my previous note) - as such, an individual who is asked whether they are satisfied is likely considering how the rating reflects on their judment, not their actual satisfaction.

Granted, this is highly speculative, and I don't expect one could develop a survey question that would avoid that bias to separate "real" satisfaction from alleged satisfaction. But even if ego were taken out of the equation, it remains likely that customers would remain generally positive about past decisions, as it's a reflection of known facts: they can be certain that the product they purchased did (or did not) satisfy their need and that the experience of dealing with the vendor was pleasant or unpleasant. It is known.

Loyalty, meanwhile, depends on the unknown, and requires greater speculation about possible future conditions. When a similar need arises in the future, the customer may have doubts that the present supplier or product will meet their needs in the same way. Or perhaps the nature of their needs will be different due to the situation in which they will be when the need arises. Or perhaps they will become aware of additional alternatives they might have preferred had they been available in the past.

Since loyalty deals with future conditions that are not known, it is unlikely that it can be measured, except by monitoring purchasing behavior - and even then, it is only past behavior that can be observed. You cannot assess whether a customer will be loyal, only that they have been loyal thus far, following a pattern that can change at any time.

But neither can satisfaction accurately be gauged by a survey question. It will always be influenced by the conditions under which the buying decision was made in the past, and it is highly likely to be skewed by the desire to escape the embarrassment of admitting a mistake.

And so, to say that a customer "reports being satisfied" with a past purchase means little to nothing. The (objective) fact that the same person has purchased steadily is more telling of their level of satisfaction - and at the same time, past behavior cannot be taken as a a guarantee of future behavior.

In the end, I don't think that customer satisfaction can be dismissed altogether. A person who has a rotten experience is probably less likely to repurchase from the same vendor, and a person who's had an excellent experience is probably more likely to purchase. So there is some connection, though not as strong as many seem to assume.

My sense is that each purchase of a product presents a unique buying opportunity and a unique buying decision, and the notion that "this brand has satisfied my needs in the past" is one of many factors that drive their decision at each instance in which they find themselves in similar circumstances.

The nature of these factors merits more consideration at a later time - but for the present topic, I'm left with the sense that measurements of satisfaction are neither as reliable nor as accurate as they are purported to be, and merit a bit less consideration than I've given them in the past.

Monday, November 22, 2010

Fewer Customers = More Profit

I read an interesting case study today, one that defies the common belief that, in order to increase profits, a company must constantly grow its market share. The company in question (whose name was withheld) slashed its customer base by 60% and more than doubled its bottom-line profit as a result. How is this possible?

The answer seems entirely reasonable ... the company dumped customers that were not profitable to serve. Fundamentally, it analyzed its customers in terms of the amount of revenue it received, then cross-referenced this against the amount of cost undertaken to acquire and support each customer. As a result, its customer base was split into four groups:
  • High-revenue/low-cost (12%)
  • High-revenue/high-cost (9%)
  • Low-revenue/low-cost (33%)
  • Low-revenue/high-cost (46%)
Naturally, the high-revenue/low-cost is the most desirable of the groups, on which the greatest amount of income is made for the least expense. In the case study, the company felt that it didn't need to do anything more than it was already doing to retain a steady stream of income from these customers.

I balk at that suggestion, as it sounds to me like it's advocating taking good customers for granted, and concluding that paying any more to provide them with better service would not result in an increase in revenue. But I have to concede that it makes sense - and there is a logical point at which a customer is buying as much and as often as he ever will, and additional effort to get him to buy more is pointless. There wasn't sufficient evidence to suggest whether that held true, but my sense is that there was probably a potential for increased profitability with a bit more effort for some percentage of these customers.

On the opposite end of the scale are the low-revenue/high-cost customers. These are customers who will only buy if offered a deep discount and/or require a (costly) effort to get them to buy at all. Even once you've sold them, you have to undertake a similar effort to get them to repurchase. And when you take these costs into account, the company was actually taking a loss on many of these customers - paying more to get them to buy than the company made from the sale. And so, the company stopped trying to get their business.

The high-revenue/high-cost customers were evaluated on a case-by-case basis. These were "primadonna" customers who brought in a lot of business, and felt entitled to volume discounts, special handling, rush service, and all the other "perks" given to high-volume accounts. The problem is that, in some cases, the high revenue was gobbled up by these perks, and some of them were costing the company more to serve than it made from their orders. After careful consideration, about a third of these customers were dumped, just by cutting off the perks (which means that the other two-thirds remained, and that the perks weren't really necessary to retain their business).

The low-revenue/low-cost customers became the focus of the company's marketing efforts - specifically, in determining why these customers were not buying more goods more often, and attempting to coax them into the high-revenue/low-cost category, provided that the amount of effort it would take to win their business would not make them a high-cost customer as well. In terms of investment, these customers gave the company the most additional revenue per dollar spent.

So in the end, the company decreased its customer base to a little more than a third of what it had been - but in doing so, it evaluated the profitability of customers and retained those who generated the most revenue for the least expense. The result was a smaller customer base, but one that was more stable, and a leaner and more prosperous organization.

And as to the customers who cost more than they were worth, the company found that it was better off without them - and if these customers took their business to the competition, so much the better. While it wasn't their intention to saddle competing firms with low-grade customers who would erode their profitability and level of service to their existing ones, it would be a natural side effect.

What's more, the low-revenue/low-cost customer for one firm is generally a regular (high-revenue/low-cost) customer of another, who occasionally buys elsewhere. If the firms that regularly serve these customers are saddled with toxic waste, they are more likely to shop around for a new "regular" vendor, and their top considerations are the firms they've done a little business with on the side.

This last conclusion is largely speculative, and there was no clear chain of evidence that the primary company gained more good customers for having dumped its bad ones on the competition - though it's an entirely plausible notion.

Thursday, November 18, 2010

Ethical Marketing

The core principle of ethics in marketing is simple enough, and appears in virtually every textbook on marketing ever written: the function of marketing (advertising, salesmanship, promotion, etc.) is to help people to identify and obtain products and services that serve their needs.

This notion has been taught for decades, and most will pay lip-service to it, but it's very rarely put into practice. Some have consciously abandoned this ideal, others continue to cleave to it even though their actions are patently incongruous. As such, it's no wonder that no-one seems to be able to get relationship marketing "right." It's based on an ethical principle that is not understood or accepted.

Relationship marketing - in fact, marketing in general, be it sales, promotion, advertising, or whatever - is meant to begin with human needs, and then finding ways in which they can be served. But in practice, marketing often begins with a product or service, then seeks to find a way to convince people they need it.

The difference between ethical marketing an unethical marketing can be witnessed when a seller is presented with a prospect who does not need their product. In such a situation, the ethical marketer backs away from the prospect, realizing that the product or service isn't of value to them, and seeks out prospects who might need it.

The unethical marketer will attempt to pressure the prospect (who, at this point, is more accurately considered to be "the mark') into purchasing it anyway, and there are any number of ticks that can be used to get the mark to pay for something that is of no appreciable benefit. There are a myriad of tactics for doing so, which largely boil down to deceiving the customer into thinking that they need a product so that you can get them to buy things they don't need.

In that sense, relationship marketing is an attempt to get back on the right track: to seek to understand the customer, that you might become more familiar with his needs, that you might offer him solutions to them (even if it means creating a new product or service). But in many instances, it seems to be going off-track: it begins with gathering information about the customer, but the information is used as a means to more effectively deceive them into purchasing an unneeded product.

This is largely the fault of old-school metrics: the success of marketing is measured by the number of products sold, rather than the number of needs met. The two are not synonymous: as taking the former approach places emphasis on pushing product, regardless of whether the prospect has any need for it. The latter acknowledges that there is a certain amount of need, and does not place emphasis on selling any amount of product over and above the amount of need that exists for it.

All of this seems somewhat abstract, so an example might help to concretize it: consider the example of a company that has developed a highly effective antivenin for all north American snake bites - which would be a boon, in that present antivenin requires the precise identification of a species. Given that about 8,000 people a year receive venomous bites (and for purposes of trivia, nine to fifteen die), the maximum amount of need is 8,000 doses per year.

If the supplier is perfectly ethical and perfectly effective in identifying the source of need, they will seek to sell 8,000 doses per year - exactly enough to fill the need that exits. A supplier can still claim to be ethical in selling more than that amount, in order that hospitals and clinics might have it on hand in case they need it, admitting that they are unable to predict with much accuracy when the need for it may arise.

If the supplier instead sets a goal to sell a specific number of doses, without considering the need, it will find itself in unethical territory (intentionally or unintentionally). There might be any number of "reasons" that could be offered for setting a sales goal of 100,000 units when the actual level of need is far less - but in the end, the "reasons" are merely excuses for unethical behavior. The motive is no different than that of any con-man or swindler: to sell as much as possible, even if customers don't need the product.

And this is precisely where marketing fails its stated ethics, to serve the needs of the customers. It's said that a good salesman can sell ice to an Eskimo - and this is the goal that seems to drive behavior. But from an ethical perspective, a "good" salesman would realize there is no need to be served, and offer that customer a different product for an actual need, or seek to offer his product to those who could derive a benefit from having it.

Sunday, November 14, 2010

Redefining Quality

An odd question was stuck in my head - so naturally, I had to do the research and put it to rest so I could think about other things. The question: why doesn't anyone seem to sell "Grade A" beef anymore? It used to be all over the place, and now, all that supermarkets seem to carry is select, choice, and prime. The answer I found is a little disturbing, but worth considering in terms of quality of service and the value of brands.

Simply stated: the USDA changed he grading scale. It used to be "Grade A" (good) was the top grade of meat, "Grade B" (standard) was a lower grade that could still be sold raw, and "Grade C" (utility) was meat that had to be cooked and canned immediately in order to be sold for human consumption. There are lesser grades, mostly for pet food, but A, B, and C were the three kinds that might turn up in a supermarket.

Some time ago, they changed that to a new scale: prime, choice, good (later renamed "select"), standard, commercial, and utility (again, plus lower grades for animal consumption). The first four grades are safe to be shipped and sold raw, and the last two must be cooked and canned. That would seem to imply that the quality of supermarket beef has improved, being as there are now three grades above standard rather than just one. But that assumption is entirely wrong.

As it turns out, "prime" beef - which consumers have been convinced is an ultra-premium grade that only high-end restaurants and specialty markets can get hold of, meets the same standards as the "Grade A" beef that once was readily available anywhere. Meanwhile, "choice" and "select" are the equivalent of "Grade B" beef that was the low-end of meat that could be legally sold raw. And today's "Standard" beef? It is the equivalent of what was once "Grade C" or "Utility" beef, which couldn't legally be sold raw before the standard was changed.

And yes, this may seem a bit like hyperbole and sensationalism, feeding into the food-phobia of the present day, but here's a link to the research - the comparison of current grades and former grades is illustrated on page 41.

What this comes down to is a trick played on consumers, who would generally not accept "standard" or "utility" beef in their supermarkets, but will buy the exact same quality of meat if it's labeled "select" or "choice." In fact, most supermarkets advertise the fact that all the beef they sell is at least "select," and charge a premium for a choice and prime.

I wonder why this hasn't gotten out before now. With all the organic, free range, natural hubbub, the degradation of food standards would seem to be of greater concern. My sense is, if word gets out, there will be a lot of explaining to be done, and a loss of trust in the institutions that are supposed to protect consumers, but instead seem to be conspiring with producers to deceive and cheat them.

In the interests of fairness, it's probably worth noting that cleanliness in the food industry has greatly improved over the past few decades, and that it's probably entirely safe to consume beef of a grade that would have been a bit dangerous twenty or so years in the past, and that consumer insistence on having the very highest grade possible, even when lesser grades are entirely serviceable, is something that merits charging a premium for squeamishness.

But in the end, I'm still left with a sense of resentment about the entire affair: that rather than seek to improve a product to a standard that's higher than the authorities require, the industry lobbied to have standards lowered and redefined in order to make products appear to be "prime" or "choice" without doing anything to improve the actual quality of the product.

It's probably the easier route, and almost certainly the cheaper one, but it seems to me a violation of trust that will, over time, erode consumer confidence across the board rather than strengthen loyalty to the producers that are willing to do more for the consumer.

And to end on a brighter note, there does seem to be some effort underway to "brand" food items that were once commoditized. Chances are, consumers don't know the name of the producer of the meat they consume, and generally don't care - beef is beef - but in future, the degradation of industry standards will add value to branding, such that customers can purchase and become loyal to a specific producer, or a specific vendor, who holds themselves to a higher standard.

Wednesday, November 10, 2010

Burned Customers

As vendors tune in to the notion of relationship marketing, the focus seems fixed on the future - and while I accept the notion that the past cannot be changed, no use crying over spilled milk, and so on, to completely ignore past interactions with a prospect or customer is to overlook barriers to forging a future relationship that must be addressed before the relationship has any chance of moving forward.

The list of individuals a company has "burned" is of little consequence to the mass-media marketing approach: it's generally accepted that a mass-broadcast message is going to reach a large portion of people who are not going to be receptive to the message - whether it's because they have had a negative experience with the advertiser, they find the advertisement itself to be offensive, or do not have the need for the product or the means to purchase it.

However, a one-to-one marketing approach, enables communication to be tailored to the individual (through live sales representatives, telemarketing, direct mail, and new media), companies have the ability to control what they communicate (and decide whether to communicate at all) to each person they intend to reach.

At that level, campaigns can be segmented to the key audiences: to eliminate those who are not prospective buyers, to seek to gain the business of a qualified process, and to seek to improve the relationship with an existing customer, with an eye toward expanding breadth and frequency of purchase.

The list of burned customers should not be lumped into the individuals who are not prospective buyers. Because they once purchased from the advertiser, it's clear that they have the need for the product and the means to obtain it - and as such, they should be considered as attractive a market as any other qualified buyer.

And it's worth noting that not every former customer is a burned customer: some of them have simply taken their business to another provider who, at least for a time, offered a better price or desirable features that were unavailable with the original provider. There's much to be learned from former customers - but that's beside the present point.

Burned customers are an entirely different species: they weren't lured away by a better offer, and I suspect that in many cases they have accepted an inferior one, because their motivation was not to seek out a better relationship, but merely to get out of a bad one.

My sense is that winning back a burned customer is a topic that authors and theorists avoid because it's a very touchy situation, and very difficult to negotiate when you're starting from a disadvantage. But it's also my sense that, if you can get this "right," restoring your relationship can do much for your overall reputation.

At the very least, making amends with a burned customer will decrease their incentive to spread negative word-of-mouth, but it's also akin to a service recovery, and I suspect that if you can manage to win back a burned customer, they will become a very good customer and a staunch advocate.

I'll keep my eyes out for an article or book that examines this phenomenon. I've not seen one to date, and I expect that, since companies are new to relationship marketing, there are still many low-hanging fruit among the population of customers they have not yet burned. But as the practice expands, and the crowd of prospects who aren't already engaged to a competitor becomes thinner, there will be greater interest in pursuing this segment.

Saturday, November 6, 2010

Bank 2.0

I've recently added study notes on a book entitled Bank 2.0 - which, in spite of being written from a European perspective by an author who's a bit overenthusiastic and has a penchant for exaggeration and distortion, is definitely a worthwhile read.

For the past few decades, banks have been laggards in adopting new technology, and have generally shunned the Internet and mobile channels as being fraught with risk, and required customers to yield to the terms and procedures set by the industry in order to obtain service.

Given the increased competition in the industry and a loss of consumer confidence as a result of the recent financial fiasco that resulted in a global depression, much has changed - and much more will change.

The author's vision of the future is overly ambitious in its anticipation of radical changes in the near term: a global economy in which currency issued by nations is replaced by independent virtual money systems and the abolition of not only physical currency but also physical artifacts such as payment cards. Some of these notions fall into the category of "tried and failed," others seem highly speculative - but much of what the author suggests seems entirely plausible, possible, and even likely, though on a far less aggressive time-table than he suggests.

While fascination with technology seems to take center stage, the book describes a change in the relationship between financial institutions and their customers: a complete reversal of power in which stodgy institutions that long maintained the license to dictate terms of service, by virtue of their control over the availability of credit and investment vehicles, must now yield to a customer base who demands service, no longer sees the traditional institution as trustworthy and infallible, and is willing to take their business elsewhere if service does not result in their complete satisfaction.

While less glamorous, this is far more fundamental and revolutionary than the technical gimmickry that tends to take center stage in discussions of future trends.

Tuesday, November 2, 2010

How Bureaucracy Crushes Innovation

The notion that bureaucracy crushes innovative ideas is nothing new, and the notion that a small company with little administrative process can easily out-maneuver larger organizations with greater resources is generally accepted or presented as an apathetic excuse for lack of progress so often that it's become virtually axiomatic. But how does this happen?

My sense (and sadly, my experience) is that great ideas occur even within the confines of heavily bureaucratized organizations, but are crushed before they can come to fruition, largely because of the internal politics. And to escape from yet another abstraction, by "politics" I mean the conflict among priorities among various parties within an organization.

To run through the process:

An innovative idea generally occurs when an individual stumbles across an idea for an improvement to the product, generally driven by notions of quality. The stimulus for most great ideas, I believe, is focused on the needs of the customer, and geared toward some facet of the product that makes it better for the consumer - whether it's the design of the product itself, the way in which it is distributed or marketed, or the way in which the customer is supported after the purchase.

I want to underscore the notion that it is an individual who comes up with the idea. While teams, groups, and departments may contribute to an idea and "help" to develop it, cognition and discovery take place in the single mind of a single person: there is no collective consciousness that causes multiple people to come up with the same idea simultaneously - one person has an idea.

And this is the first stumbling block: the individual communicates the idea to others close to themselves: their boss, their team, their department. At that point, the idea is developed - some people will help to improve the idea itself, some people will compromise the idea to forward their own agenda, some will contribute just to be part of the action.

This is not necessarily evil: those who seek to jump on the bandwagon may be motivated by the desire to undermine the idea, or to claim credit for it, but to assume this is the primary motive of every such person is overly pessimistic. In a healthy team culture, the motivation is simply to help a colleague, and the people who seek to contribute, whether by suggesting ideas of their own or providing a critical perspective, have the intention to improve the idea.

If the innovation survives this first test, it's the presented to others who have the authority to provide resources to develop and implement the idea. Typically, these are the accountants and financiers, whose sole agenda is to determine whether the notion makes sense from a monetary perspective: will it generate a profit? To be worth investment, there must be a return: either by increased revenue or decreased expenses.

Neither is this necessarily evil: the difference between a business and a charity is that the former seeks to make money for its investors. The greatest idea, one that makes the product an ideal solution to customer needs, isn't worth pursuing if the business is going to lose money (or make less money) on every sale because the costs exceed the benefits.

If the innovation survives the accounting tests, there is then a period of development, which includes both the planning stage and the execution stage. This is a minefield for innovative ideas, where there are a multitude of people, each with their own agenda, who will see any new idea as a bundle of opportunities and threats.

And again, this is not necessarily evil. For example, an operations manager might be concerned about the stability and security of the operation for which he is responsible - the resistance to innovation is not necessarily an ignorant fear of change, but often a more rational and calculated concern over the impact of the new development to the existing operation.

And finally, the idea that has made it this far down the belt-line is launched, them managed by operations staff, where the watchwords are "faster" and "cheaper," to which "better" is very often sacrificed. Unless the innovation is for an efficiency improvement, the additional effort necessary to execute upon a new idea is regarded as an inefficiency to be reduced or eliminated. And while the idea might be implemented as intended, over time, changes made to improve efficiency may undermine its effectiveness.

As such, these conflicting agendas tend to crush innovative ideas, or modify them to the point where they no longer achieve their intended results.

Friday, October 29, 2010

Customer Service vs. Process Management

Customer service and process management are often at odds with one another: the desire to improve gross margin requires creating a product as cheaply as possible (regardless of quality), whereas the desire to improve customer satisfaction requires creating a product that's as good as possible (regardless of cost). As such, the market offerings of most companies represent a compromise between the two - or at best, a calculated decision about the level of quality-versus-price that a given product represents.

On one end of the spectrum is the company that offers a very low-quality product, so poorly suited to the needs and desires of the consumer that no-one would be willing to buy it if it were even a little bit worse. On the other end of the spectrum is the company that offers a very high-quality product, but one that is very expensive, so much so that no-one would be willing to buy it if it the price were even a little bit higher.

My sense is that neither extreme is the "natural" winner in all instances: a company chooses to produce a product that balances quality against price to provide an offering that is appealing to a given market segment. Some customers are willing to pay a premium price for a high-quality product, whereas others seek to pay the lowest price possible and will accept a product that is barely sufficient.

And at this point, I'm going to stop writing: I suspect that I am merely rehashing a hackneyed argument of price versus quality and have forgotten what it was that entered my mind that brought something new to the conversation. I'll return to it later if it re-occurs to me.

Monday, October 25, 2010

Phases of Innovation

I've been struck by a notion, which probably needs much more refinement, that the nature or character of "innovation" is heavily influenced by environmental factors - it's not quite as simple as the level of economic development or the phases in the product lifecycle. Though it's similar in a number of ways, it's different enough that the character of innovation can't be neatly ascribed to those existing theories.

Discovery Phase

During the earliest phases of the product lifecycle, development and introduction, innovation is largely a matter of invention: an entirely new product is invented, which was never before in existence, and it's also discovered that the product serves some human need (which is important, as many of the "discoveries" of science have little application to human needs, at least initially).

The "discovery" phase also carries over to the second phase of the product lifecycle, introduction, in the sense that , while the supplier has discovered a new product by a process of invention, the buyer must also discover it - traditionally, by the supplier communicating information to the market to advertise the product, but more recently by word-of-mouth.

In this phase, innovation is characterized by invention and application: a product is created, and it is matched with a consumer need.

Manufacturing Phase

The manufacturing phase of innovation occurs during the introduction and growth periods of the product lifecycle, during which time innovation is geared toward developing methods of producing a product (or a service) in sufficient quantity to satisfy market demand.

The transition from discovery to manufacturing is a vulnerable period, during which a company that discovers a product seeks to bring it to the market before its competitors. My sense is that there are many instances in which one company has invented something is beaten to market by another, especially in the technology industry.

In this phase, innovation is characterized by entrepreneurship: the product must be produced and delivered to the consumer.

Efficiency Phase

The efficiency phase of innovation may occur during the last three phases of the product lifecycle: growth, maturity, and decline. It's generally characterized by multiple producers entering the market, competing largely on the basis of price.

Competition in this phase is for share of market: efficiency can take the form of the least costly manufacturing process (by cutting costs, price can be lowered to gain competitive advantage) or the most productive manufacturing process (being able to supply in quantity, such that customers who want the product immediately can buy from you rather than waiting for a competitor to catch up to back orders).

As such, innovation in this phase generally consists of cost reduction and supply-chain management, with the goal of gaining share of market.

Service Phase

The service phase may, in some products, be substituted for the efficiency phase, though for most products that come to mind, it generally occurs afterward, when firms are more or less equal in their ability to produce a good cheaply and in sufficient quantity and seek to differentiate themselves from competitors in ways that customers value.

Customer preference is of primary importance: given that the good is readily available from multiple sources, and there is little differentiation in product price, competitive advantage is won by the firm that best satisfies customer needs in terms that have less to do with the physical properties of the product or its price, but have to do with the success of the product in satisfying consumer needs other than those directly addressed by the product itself (core value is not sacrificed, but augmented).

As such, innovation in this phase consists of quality improvement and customer relationship management, with a goal of gaining customer loyalty and improving share of wallet.


I'll concede that this is very early thinking, and as such may be a bit half-baked and ill-defined. I expect I'll return to it later for more detailed consideration - just wanted to jot it down in this notebook for now.

Friday, October 22, 2010

Proactive Service Recovery

I got an interesting e-mail from Netflix:
Yesterday, you may have had trouble instantly watching TV episodes or movies due to technical issues.

We are sorry for the inconvenience this may have caused. If you attempted and were unable to instantly watch TV episodes or movies yesterday, click on this account specific link in the next 7 days to apply your 2% credit to your next billing statement.

... we apologize for any inconvenience, and thank you for your understanding. If you need further assistance, please call us ...
That's very close to a perfect service recovery - the "very close" is on account of the minor inconvenience of having to click a link to claim the credit. I expect anyone who overlooks the message until it's too late to claim the credit will have quite a different impression - and even though I claimed the credit in time, it's left me with the distinct impression that there was at least one weasel in the meeting who didn't feel the customer was owed anything at all and wanted to minimize cost rather than maximize customer service.

That minor flaw aside, their prompt reaction demonstrates a level customer service and responsibility that many companies are unwilling to provide, and seem incapable even of conceiving.

It also calls to mind the significantly lower level of concern shown by other companies that offer a 24/7 service: electricity, water, internet access, cable television, cell phone service. In general, they offer a high level of service availability, and outages are very rare - but when an outage occurs, they demonstrate a complete lack of concern and make every attempt to dodge responsibility. The cable company has never bothered to apologize for a power outage, have certainly never sent me a refund, and when I've had to call them to report a problem, they offer up some lame excuse in an irritated tone.

Netflix's example in this instance is one for the books - specifically, the "customer service" textbooks: when even a minor problem arises with your service...
  1. Be proactive: don't make the customer call you to report a problem you already know about.
  2. Accept responsibility: apologize and don't offer lame excuses or try to shift the blame
  3. Provide concession: preferably, without putting the burden on the customer to claim it
Do these things, and the customer will likely be more impressed by your reaction than disappointed by the problem. It's really not that hard, and doesn't cost that much, to not only salvage the relationship, but leave the customer with a long-term impression that your company is genuinely concerned about customer satisfaction (how many advertising and social media dollars would you have to spend to build that much positive sentiment?)

Fail to do them, and you can save the embarrassment of having to admit the problem occurred, and the cost of any concession - but you'll disappoint the customer. While you may not lose their business, don't kid yourself: the reason they remain "loyal" to your company is only their own apathy, coupled with the failure of your competitors to do any better, and it lasts only as long as no-one else does any better.

Monday, October 18, 2010

Never Outsource Competitive Advantage

I felt it was worth jotting down this axiom in my notebook, because recently I've seen a few articles advocating a bad practice - and over the years, I've seen (and worked for) a number of companies who undertook this very practice, and the outcome was never happy.

"Never outsource competitive advantage" seems like a straightforward statement, and is a basic concept of strategy, that there are certain qualities of a business that make it a leader in the field, whose customers prefer it over its competition and evidence that preference in their choice of vendors.

But in operations management, where fast and cheap is the order of the day, outsourcing seems like a good idea: if you buy an off-the-rack solution and tweak it a little bit, you can gain capabilities (or streamline operations) very quickly and cheaply.

And in general, there's nothing wrong with that ... so long as what you're outsourcing isn't the very thing that gives your company an edge over the competition.

For example, unless you're an accounting firm, your ability to do payroll and tax accounting isn't what gives you a competitive edge over the competition. It's a routine task that needs to be addressed, and done with a reasonable amount of competence, but doing it a little better or worse, faster or slower, isn't going to harm the top-line revenue.

But on the other hand, if your company's competitive advantage comes from having a highly efficient logistics system to streamline the movement of raw materials through the production lines in a just-in-time fashion, you definitely don't want to put this into the hands of a vendor, who will provide you a solution that's not significantly better than the competition, because you've immediately lost your competitive edge.

This is especially true of user experience: unless you have a unique product offering, or the absolute lowest prices on the Internet, the quality that attracts new customers to your business and keeps your current ones from jumping to a competitor is the relationship they have with your company, which itself is largely derived from the user experience they have, each time they visit your site.

If you put that site, or some significant component of it, into the hands of a vendor who provides a standard solution, no better than what anyone else is using, then you've lost your edge. And in a competitive environment where one difficult transaction or one botched order will cost you the business of a few customers, then a few more, then a few more, the cost you save in hiring a vendor to roll out a shrink-wrapped solution will be undermined by the damage you'll do to your top-line revenue as customers, who once thought you were better than the rest, find that you're no different in the ways that they most value.

And so, it bears repeating: never outsource competitive advantage.

Thursday, October 14, 2010

Why Service Stinks

In the spirit of unearthing traditional knowledge about customer experience that is applicable to the new medium, I've recently read T. Scott Gross's Why Service Stinks, which examines common causes of customer service failures in brick-and-mortar retailing, focused primarily on the quick-service restaurant (QSR) industry, though it does stray into other areas of retailing as well.

While the book is primarily directed to front-line retail managers, many of the notions are applicable to the electronic channel ... though it would require a change in attitude on the part of Web storefront operators who must (and should) shift from the mental model of "enhancing" what is essentially a computer interface to their inventory and ordering systems to more of a comprehensive approach in which delivering an appropriate customer experience is foundational.

If you consider the experience of shopping on the Web, and ask yourself how you would feel if an in-store experience followed the same pattern, took the same tone, and put you through the same processes, you will quickly recognize a number of areas in which the online experience is failing, miserably, to deliver the same level of customer satisfaction (and earn the same level of customer loyalty) as meatspace retailers.

If you consider the communications you receive from retailers via e-mail and the myriad of social media, and ask yourself how you would feel if a clerk in a physical store delivered the same information, in the same tone, you will quickly recognize the reason that you feel more manipulated, alienated, and patronized by the Web-based brands that reach out to you with pretenses of wanting to serve your needs and earn your trust.

Granted: not all of the elements of the B&M retail experience are applicable to the online channel - and not all of them would be helpful or even welcome by the online shopper - but many of them are applicable, and should be applied, to improve the user experience in the online channel.

Sunday, October 10, 2010

The Fifth "P" of Marketing

Chris Borgan, a UX blogger I follow, recently posted out the basics of marketing, namely, the "four Ps" that everyone learns in the "Introduction to Marketing" class - product, price, place, and promotion - and that reflecting on them periodically, as basic as it may seem, is a good exercise for identifying fundamental shortcomings.

However, the four-P model is from the perspective of product marketing, particularly in the manufacturing sector where there is little interface with the buyer or consumer of a commercial product. My sense is that UX on the Web is more akin to services marketing and retail marketing, both of which add a fifth "P" to the list: people.

In services and retailing, this is recognized as the most critical element of competitive advantage: any other source can provide a customer with the same items, at the same prices, in the same locations, and reach them with the same messages. The reason people prefer one supplier over another is the buying experience, which is driven primarily by the people with whom them interface.

My sense is that, when it comes to online experience, this has been largely forgotten, mainly because interacting a Web site is a person-less experience in which the customer is interfacing with the inventory and ordering systems of a supplier. It's a very cold, impersonal, and unfulfilling experience - and that's just the problem.

To go a bit further down the same line of logic, it seems to make sense that the Web sites that deliver "good" experience act do so because they act as surrogates for the forgotten fifth "P" - the online channel isn't a surrogate for "place" so much as a surrogate for "person."

I'm in danger of anthropomorphizing the computer interface, granted, but what I'm getting at is that the interaction between user and site is not as closely related to the interaction between consumer and product, or place, or price, or promotion as it is to the interaction between customer and clerk, or cashier, or salesman.

It seems to me an exercise well worth undertaking to consider the customer interaction they have (or would have) with staff in any other channel, and assessing how well their interactions with a Web site stack up.

Wednesday, October 6, 2010

The Relationship Edge

I've added reading notes on a book called The Relationship Edge, which turned out to be about meatspace salesmanship rather than online relationship management. Given my recent rant about the lack of experience in books about Internet marketing, I decided to keep reading, and am generally glad I did.

The book is about relationship management in person-to-person sales, primarily in the business environment where the instances of contact between seller and the stream of revenue are both sufficient to enable the salesman to develop a relationship with regular customers whose accounts he will service over time.

Resource planning systems with automated ordering systems have sought to dispense with the inconvenience of face-to-face encounters - at the loss of the productive aspects of a less sterile interface between buyer and seller, as well as the competitive advantage gained by a vendor that provides a higher degree of service than merely filling orders.

But on the dark side, salesmanship has its unsavory characteristics, and the book is chock full of unctuous tactics that exploit social psychology to manipulate the client like a con-artist works his victim. Even so, the author express higher motives for doing so, though whether that's merely a smokescreen or earnest intent is a matter of opinion.

There are some concepts that lend themselves well to online relationship management, others that are entirely unique to face-to-face salesmanship, and a general weakness on the application of new media that comes with an air of luddite disdain ... and even the greasy bits are good to know for times when you find yourself getting worked over by a salesman who applies them to pressure you into making a bad decision.

Saturday, October 2, 2010


I've been disappointed by some of my recent readings in Internet marketing. The trade books are often bad, and the blogs are even worse. That's not to say that what I'm reading is fundamentally wrong, but that it is shallow and often misguided, based on a handful of anecdotes and the personal experiences of an author-practitioner, utterly lacking a consistent theoretical base.

Case in point, in reading about online brand relationship management, the practitioners seem to have a pioneer attitude - as if, before the Internet, no-one put much thought into these issues, and the "old ways" are shortsighted and bad, in favor of the "new way" they have discovered. And yet, their discoveries are merely a haphazard rehash of the traditional approaches they are castigating ... they don't know the "old ways" and assume that what they are suggesting is an entirely new approach.

I've noticed this about relationship marketing and e-commerce in particular. Much of the "new" knowledge is not new at all, but hearkens back to the basics of retail and B2B marketing, in which the shop owner or sales representative deals with customers in a face-to-face manner - which, in terms of age, is an even older practice than mass-marketing. Anyone who has ever provided (or to some degree, received) face-to-face customer service recognizes the value of customer relationships and brand experience to satisfaction and retention, and there is a substantial amount of theory that can be adapted to the new media.

And while much of this has been brushed-aside during the era of mass-marketing, it's not been entirely forgotten. There are still books and courses on retail and B2B marketing, though they've been largely marginalized in favor of the efficiency of dealing with customers as a faceless mass.

So in the end, my sense is that what we are experiencing is not the end of traditional marketing, but a return to traditional marketing - before the era of mass-marketing and the amalgamation of consumers into large groups who were assumed to be homogeneous - and that rather than experimenting haphazardly to "discover" or "invent" effective methods for treating them as individuals, what's needed is to blow the dust off the old textbooks and re-discover what was known before the profession took a turn.

Tuesday, September 28, 2010

Popularity vs. Accuracy

I've been in a few discussions lately on the topic of the Google search algorithm - specifically, with people who suspect that it is geared toward promoting the "big" sites and/or making sure that the smaller sites are hard to find.

Aside of conspiracy paranoia and the irrational fear of bigness (put the term "big" in from of anything and it's automatically regarded as evil: big business, big government, big media, big fruit), there's a shred of logic beneath the hysteria.

While Google keeps its ranking algorithm a trade secret (which is understandable, though it feeds the panic and suspicion), the general notion is that it ranks "big" sites first - a site that's already popular with a lot of people, by virtue of clicking it in the search results or making links to it from other sites, is likely to be more relevant to the search phrase than one that no-one seems to be paying attention to.

The problem is: that makes it difficult for a new site or page that is more closely related to a given topic to overcome the "power" that has been built up by existing pages on the same topic.

Hence, a one-paragraph blurb on Wikipedia far outranks an entire site that contains comprehensive information on the very same topic - not because it's a better source of information, but because it's been around longer, so more people know about it, have clicked it in the search results, have linked to it from their own pages.

As such, a search engine that relies upon (past) popularity and relevancy will, over time, serve to maintain the prominence of less informative or authoritative sources of information. I'm stuck for an answer to the problem, short of blowing out the buffers to reset the balance of power from time to time.

On the upside, Google's practice has largely overcome the problem of SEO spamming, which was a widespread problem in the era when search engines used the content of a page to determine its meaning - and companies that wanted to attract attention would lace their pages with popular search terms to mislead users into visiting their sites when they were looking for something else. Not that the practice is entirely dead, but it's much less prevalent than it once was.

Friday, September 24, 2010

Transcending Mimesis

On my commute this evening, I stopped at a light and saw a car with faux-wood paneling. The funny thing is that it wasn't a 1970's Oldsmobuick driven by an old man with thick spectacles and a hat with earflaps, but a relatively recent model - a PT Cruiser. It was the goofiest thing I'd seen lately, risible yet confounding: why would they do that?

I expect that wood paneling on cars was done back in the early days: the automobile was a newfangled contraption, and adding wood paneling made it look more like the horse-drawn carriages that people of that time found more familiar and comforting. Though it was patently unnecessary, inefficient, and just plain bad design, I suppose it made the transition a bit more comfortable for consumers.

But it's just not needed anymore, and seems rather silly. I'm sure that I'm not the only person for whom the sight of wood paneling seems ridiculous. But before you snicker, take a look at your rims ... don't they look a lot like chrome-plated wagon wheels? Are those thick spokes even necessary anymore? Aren't they aerodynamically inefficient?

And for that matter, do they really need to look like wagon wheels? It's doubtful that anyone living today has ever had to travel by horse-drawn wagon, so I don't expect it has the same psychological effect as wood paneling, nor is it needed. It's a vestigial tail that evolution hasn't quite transcended.

This put me in mind of the design principles of the early Internet, back in the mid-nineties when the "population" of the Internet was doubling every six months ... which meant that 50% of your user base was brand-new to the Internet, and presumably found it to be a weird, unfamiliar, and scary place.

The design guidance to overcome this was to try to make Web sites mimetic of real-world interactions. The goal for an e-commerce site was to resemble a real-store experience to make users more comfortable with this newfangled way of shopping. Fortunately, the limitations of bandwidth and the primitive state of interactive animation at the time prevented this from being achieved.

I say "fortunately" because the store experience, while familiar, is anything but efficient. It involves a lot of time and effort that, in a real-world environment, doesn't seem as much a burden as it would in the virtual world of the computer. You don't mind a two-minute walk to the back of the store to get the items there, though on the Internet, spending two minutes scrolling through a labyrinth of 3D virtual aisles would be intolerable.

And as a result, consumers have come to accept and appreciate the unique qualities of the Web - it's new and different, not at all like the real-worked experience of shopping a store or finding a book in a library - and we accept that as a Good Thing. I don't think that anyone would have appreciated a cell phone with a rotary dial, no matter how much it mimed the "real" telephones of the time. (My guess is that "there's an app for that" - though it's probably not very popular.)

But at the same time, there are vestigial tails in the most modern of devices. A good example is the "bookshelf" on the iPod - in which material is displayed in a rack, just like "real" books. There are even animation effects when you turn the pages. But why should an e-book have pages? It's as unnecessary, inefficient, preposterous, and stupid as wood paneling on a car ... and yet, there it is.

So in the end, we still have a way to go toward transcending mimesis and accepting that technology is a thing unto itself, that doesn't need to mimic obsolete technologies, but which can happily "just be itself" and exploit the capabilities of the medium, with no regret for the passing of the old.

Monday, September 20, 2010

Using Competitive Intelligence

I've added study notes about T.J. Waters's book on competitive intelligence to my site. It was a daily easy read, due to the author's narrative style - but for the same reason, I'm not entirely confident I was able to distill the meaning the author intended to convey. It's a drawback of the narrative style, not necessarily just this book or author, in that narratives tend to ramble and go off-course, as the information the author might have intended to convey was distorted or subsumed by the "story" used to communicate it ... but that's metadiscourse.

My general sense is that the author intended to convey information about competitive intelligence: gathering information about markets, organizations, and even individuals that can be used to uncover opportunities and reduce the uncertainty of the strategic planning process as well as tactical maneuvers: the more you know, the greater certainty with which you can act.

At the same time, I have some reservations. The book is highly superficial, and I've found that a little knowledge can be a dangerous thing. A person who acts boldly and confidently based on wrong information and specious assumptions tends to make bigger mistakes and do more damage than one who accepts the uncertainty of a situation and proceeds with greater caution, acknowledging that there are many things he doesn't know, and being well aware of the risk inherent in his own assumptions.

All the same, it's an interesting read, and a worthwhile practice, and while the author's survey is fairly superficial, it's a good enough introduction and food for thought.

Thursday, September 16, 2010


It seems that panic is back in fashion, drummed up over yet another social networking site that aggregates information that is already in full view of the public, and users are being coaxed (by the media, as well as the company itself) to sign up and "claim" the profiles so that they can see what is being published about them, and perhaps exercise some modicum of control.

Like all fashions, panic goes away and comes back again a few years later. It's been going on ever since telephone directories went online and people were horrified by the notion that their name, address, and phone number were "on the Internet" for anyone to see (never mind that the same information is already in the phone book, and hundreds of public records.)

In truth, assembling intelligence on individuals is a practice that began long before the Internet. The gathering of "files" on individuals goes back decades, or centuries, or even millennia. Roman emperors gathered intelligence on their enemies, political rivals, and even private citizens that might support or oppose their will. It probably goes back even further than that - so it's not a new threat at all.

What's different now is that some of the information is now more readily accessible to more people than it was before. Those whom you'd least like to have it - government agencies, marketing firms, employers, and others that might use it to exploit you or deny you access to opportunities - have had the same kind of information, and much more, at their fingertips for years.

The advent of social media - Facebook, Twitter, WordPress, LinkedIn, and more - gives people the opportunity to push out even more information about themselves and others whom they know, with the illusion of being able to control who gets to see it. But after so many incidents in which a computer glitch or a change in terms of service have exposed information that was submitted under the auspices of a privacy policy, who can trust in them anymore?

All in all, the sues and abuses of personal information leave me unable to come to a firm conclusion over whether it's a good thing or a bad thing - but whichever way I find myself leaning, I have to conceded that the availability of our personal details is a thing - a fact - that we'll all have to live with, for better or for worse.

Sunday, September 12, 2010

Personality Characteristics Evident in Product Ratings

I've been curious for some time about the reliability of "ratings and reviews" posted to e-commerce Web sites, in which ordinary people rate and review products, sharing their experiences with others. There's not much secondary research on the topic, so I conducted an informal study of product ratings, subjecting a random sampling to text analysis to determine certain factors about those individuals who post ratings, with an eye toward their reliability and motivation for doing so.

What I found was a bit surprising, though not entirely counterintuitive: the personality types that are evident in the content of reviews would seem to suggest that people who post reviews to commercial sites don't fall into the categories of personality who seek to be helpful to others. Instead, they fall into the personality categories of individuals who are narcissistic and domineering, concerned with stoking their esteem rather than helping others.

As a buyer of goods on the Internet, what I found is definitely going to make me more reluctant to trust reviews, especially the good ones, in that they are not so much the product of a person who wants to help me, but a person who wants me to help him feel smarter about himself by following the same decision, regardless of the outcome.

On the other hand, sellers can still find a way to benefit from ratings and reviews: while customer ratings are clearly disingenuous and of little use to the prospective customer, those who post reviews (who have already purchased toe product) will be able to use ratings and reviews to feed their psychological desires, which is likely to be a positive brand association that will reinforce their decision and make them less likely to switch brands or retailers at the next opportunity to repurchase.

That's not to say that online ratings and reviews are altogether useless - a small proportion of them are posted by people whose genuine interest is in being helpful to others, and by analyzing the text content of their post, retailers who want to make product reviews more beneficial to buyers could use the same tools to "flag" posts that are disingenuous and remove, or at least downplay them.

But until such a solution is in place on the server side, buyers will need to be wary of ratings and reviews.