On Feb 18, 2013, at 5:45 PM,
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wrote: Hi Doc
I must say I am enjoying the conversations on VRMProject, even at the risk of distratcting me from my client work.
Most companies are not Trader Joes, Whole Foods or Zappos.
We don't need most companies. We only need a few. Or none to start, if VRM is attractive enough. Although I note that when Amazon bought Zappos it had to write down over USD 900 million in excess inventory. These are fine examples of what Roger Martin calles #consumer capitalism'. But they are outliers with strong founders and unique value propositions that provide them with an extended competitive advantage period, not the norm.
Again, when you're pioneering, you don't go into the settle places. You look for the greenfields on the horizons, the exceptions that offer opportunities. Giff Gaff in the UK is similar to these companies. It is an MVNO experiment run by O2 on its network. As it has grown it has run into the sort of problems that traditional companies face during rapid growth and is starting to add marketing staff, customer service staff, service staff and all the paraphenalia of normal businesses.
I think you take the Trader Joes's hyperbole a little too far.
Why? It's a successful example of something. That it's not normative does not make it a bad example. I am not for one minute suggesting that Cos should screw the customer. Far from it.
Nor was I suggesting that. I am suggesting that most Cos - the 70% in the middle of the Gaussian curve of competitiveness - face difficult trade-offs between meeting customer needs (should they even know them), developing the required capabilities to do so (should they even now what they are) and maximising cashflow. For these ordinary Joe companies, they naturally err towards maximising their own cashflow and that inventitably means offering less to customers. Whilst not inevitable, it is common enough for those schooled in inductive logic to declare victory.
So declare it. We're not attacking the standing norm here. We are working on a new one. If we succeed in the short run, it will be by exception, not rule. In a delicious irony I note that Trader Joe's is owned by Karl Albrecht, the multi-billionaire owner of Aldi Group in Germany, one of the most cut-throat retai operators in Europe. Trader Joes has 375 stores, Aldi has over 5,000 stores. And 90% of Germans shop at one. I do. Despite it's lack of overt customer-centricity. As a recent article in Strategy+Business points out. Value beats values any day of the week.
Trader Joe's got a commitment from Aldi not to interfere, and — far as I know — they haven't.
Doc Best regards from Cologne, Graham -- Dr. Graham Hill
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UK +44 7564 122 633 DE +49 170 487 6192 http://twitter.com/GrahamHill http://www.linkedin.com/in/grahamhill http://www.customerthink.com/graham_hill Partner Optima Partners http://www.optimapartners.co.uk Senior Associate Nyras Capital http://www.nyras.co.uk
Gesendet: Montag, 18. Februar 2013 um 19:47 Uhr
Von: "Doc Searls" <
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An: "Graham Hill" <
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Cc: "Iain Henderson" <
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VRM" <
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Betreff: Re: [projectvrm] Multifunctional Advertising
Hi Iain
It doesn't take much thought to show that if you put the customers needs ahead of the Co's then it will in all likelihood be less profitable.
Why should these be opposed? The original role of a merchant (e.g. of Venice, e.g. Marco Polo) was to serve as an agent for the customer. In The Intention Economy I give the example of Trader Joe's here in the U.S., which has no marketing of the conventional sort, no advertising, no coupons, no loyalty cards, no gimmicks of any kind, not even any discounts -- and is loved by customers. Zappos beat Nordstrom at its own game (selling shoes) by offering not only near infinite inventory, but rewarded call center people for maximizing rather than minimizing time on the phone with customers. In the circumstances you quote - not selling something if you think a customer does not need it or could get a better one elsewhere and so on - the Co might even be unprofitable and ultimately, go out of business.
Yes, but again, is that the only possible outcome? I would describe this as the extreme customer-centricity position. It is overwhelmingly a liberal moral philosphical position rather an economic one.
Again, I'll raise the case of Trader Joe's. What they did was align the economic imperatives with the moral ones and found great instruction of the former by the latter. Empathize with the customer and the economics will start lining up. Screw the customer for the "good" of the company alone and the the customer will eventually resent it and go away.
The key in both cases was removing the self-blinding overhead that comes from gaming the customer in complicated ways, which is what's happening today with Big Data, analytics, and adtech advertising. It's a mathematical shell game played by sellers that both sides risk losing. It's why Target, for example, got into trouble. (See < http://www.nytimes.com/2012/02/19/magazine/shopping-habits.html?pagewanted=all&_r=0>.) Meanwhile, all Trader Joe's people do (as Quinn's did) is talk to customers. Simple as that. And the benefits are easy to see.
If you look at the wealth of customer value management articles in marketing journals, for example, the work of Day, Reinartz, Kumar, Donkers, Johnson, Selnes, etc, (references available on request) they all demonstrate that managing the customer for value to the Co is a significantly more profitable approach for the Co than managing them for the customer's value.
This is the normal Co-centricity position. It is not any less morally acceptable than the customer-centric position, but it is a much more economic one.
Again I'd like to raise another choice: customer-driven-icity. This is where "markets are conversations" goes. If your store *talks* to people as human beings, you get better intelligence and a sense of what's good for both sides, constantly. And you get valuable intangibles, such as trust.
A challenge for VRM developers is to improve on personal interactions. It can be done in a networked world, but how is not quite obvious. If there is so much more money to be had from managing customers for value, why would any sane Co executive want to risk that by managing customers any other way. This is the economic challenge you have to overcome.
There is also a middle position that delivers more to each party that I may explore in another email.
That may be where we're going in the same direction.
Doc Best regards from Cologne, Graham
PS. I have delated the names other than yours and the Project VRM group. I assume that stops those people(other than you) getting teh emails twice.
Am 18.02.2013 um 18:07 schrieb Iain Henderson: Now there's a question Graham….. The answer to that could be book-length, or a couple of paragraphs with a link, thankfully I only have time for the latter.
What I personally would mean by 'customer-centric' would be to put the needs of the customer ahead of the needs of the organisation. Simply put, that would mean not selling a product to a customer if I believed or knew they either did not need it, or could get it better elsewhere. Or it could mean not charging a premium rate number for customer service, when I know full well that this would really p*** off the customer.
Clearly many organisations call themselves customer-centric, but are actually shareholder/ stakeholder-centric, with possible some account taken of customer needs in the decision-making process.
In that respect, customer-centricity goes back way more than 20 years; its the classic local shop model (know your customers and their needs and set yourself up to service them). 'CRM' originally set out to try to replicate that, before the accountants and call centre folks grabbed it.
If I was looking for more sophisticated insights into customer-centricity, i'd use something like this framework, or its predecessor CMAT (Customer Management Assessment Tool). These are models of good customer management practice which take into account real organisational practices. In that assessment mode, customer centricity and product centricity are seen as a tangible set of business processes that can be measured and improved. In that case, product-centricity over customer-centricity is no bad thing, so long as it is a conscious choice.
Right now i'm not pitching customer-centricity to any business; I was using the term to refer to past examples. As per Doc's post, i'd use customer driven to explain/ pitch more of a VRM style approach.
Cheers
Iain
On 18 Feb 2013, at 16:33, Graham Hill <
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The notion of customer-centricity has been around for more than 20 years. It goes all the way back to the infamous TARP studies in thea early 80s.
But what exactly so you mean by customer-centricity? It means many things to many people; from always putting customers needs first, all the way through to managing customers for maximum profitability for the business.
And why do you think your definition of customer-centricity should appeal to businesses that have done pretty well whilst not being particularly customer centric?
Best regards from Cologne, Graham
Am 18.02.2013 um 15:59 schrieb Iain Henderson:
And a couple more metrics.
Average tenure of a marketing person in the same role - 2 years
That is to say, long term customer satisfaction/ value is someone else's problem.
Average tenure of a CEO in a large B2C organisation - 3 years.
I've had several consulting projects about customer-centricity that hit road-blocks at CEO level; the simple and openly stated issue being that whilst they recognise the logic, they know that to make radical changes (from typically a product-centric strategy to a genuine customer-centric) will cost them money and competitive positioning in the short term. There are ways to get a good blend of customer and product-centricity, but most organisations don't have the data, the top-level buy-in or the patience to pull that off.
Iain
On 18 Feb 2013, at 14:04, Doc Searls <
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One additional point: most of the time we aren't buying anything, or even considering it. That also narrows the windows of "now."
But there are times we are shopping or buying — or dealing with issues of ownership. Then what? Well, VRM should be there to help with that.
Doc
On Feb 17, 2013, at 11:01 PM, Chris Savage <
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Well, a couple of things that build on this.
1. I read of a psychological study that found that the subjective experience of "now" lasts about 3 seconds. That is, if you ask people about whether some stimulus or whatever the researchers were looking at was happening "now," the general response was "yes" as long as the thing occurred plus or minus 1.5 seconds or so of the time of the asking.
2. This actually can be converted to a measure of how much attention people have in a day. If at each quantum of "now"-ness a person can only effectively be attending to one thing, then in a 24-hour day, if we assume 16 are conscious and available, that's roughly 19,200 "moments" of "now" a person has each day.
3. Advertisers well know how to command (literally, as in, what we are hard-wired for) our attention: loud noises, quick movements, flashes of light, attractive women (to get male attention) etc. So, on the "tragedy of the attention commons" I was postulating earlier, what we have is a large but non-infinite number of opportunities for folks who want our attention, to grab it. By going from traditional print to the Internet, we have created a lot more opportunities for that. There are 19,200 "nows" per day per person, that can input either signal or noise. Increasing ads (including directed ads) means more noise and less signal, net. Key point: The pool of available attention is very limited. (Note: if it's really 3.2 hours per week, that's only about 3,840 moments-of-attention available.) That very limited pool is what more and more advertisers are trying to colonize. So it's no wonder, it seems to me, that people are both building taller defenses and getting more exhausted in maintaining them.
4. There are some behavioral economic studies being done by a guy at MIT that analogies the lives of people in poverty that indicates that their choices are harder to make than non-poor folks, in an analogy to what is called the "suitcase problem." Suppose you are packing for a weekend trip, and you have a very large suitcase. Packing is easy: you put in stuff you know you'll need and stuff you might need. Very little mental effort. Now imagine going on a one-week trip and all you are allowed is one carry-on-size bag. Now you have a hard problem: you have to decide what is essential and what isn't, what has to go in first in order to make sure everything will fit, etc. It's a harder mental task (which various studies have shown truly use up biological energy). The MIT guy points out that the entire task of facing the economy is, for a poor person, like trying to pack for a week-long trip with too small a suitcase: the suitcase is their money, and the clothes, etc., to go in, are their needs. Every day is mentally exhausting for poor people, because poor people actually have to do a lot more mental work to get through a day than does a middle-class or rich person.
5. A similar phenomenon occurs with the issue of allocating our attention. Figuring out what is signal and what is noise takes work, and it takes more and more work the more noise there is -- like listening to your favorite radio station as you drive further and further away on the long-distance highway. It gets scratchier and fuller with static, but if you keep listening harder (interesting idiom there...) you can still hear what they are saying. With more and more informational static being thrown at us for our 19,200 "nows" per day, it takes lots of mental work just to try to keep focused on what actually matters in a life (kids ... job ... spouse ... spiritual practice ... hobbies/interests). Fitting all of that into the mental time suitcase can be really hard. Adding all the noise makes it harder.
Do advertisers ever think in terms of their effects on a limited, shared resource, aka, my brain cycles?
Chris S.
2/17/2013 5:07 PM, Iain Henderson wrote:
Thanks Katherine, your point re number of hours in the day reminded me of a key quote sent to the list a few months back (by Richard Bates, Consumer Focus, UK).
“Consumers are however pressed for time and spend on average only 3.2 hours a week on all consumer tasks. To ensure that consumers remain empowered in the face of the growing information overload and increasing lack of time for shopping, new shortcuts and comparison tools need to be found.”
That quote came from a research study across more than 55,000 individuals, so pretty robust. European Commission Staff Working Paper (2011): Consumer Empowerment in the EU (SEC [2011] 469 final), Brussels: European Commission – http://bit.ly/J45aRl
Add to that, one of the main effects of The Internet on the individual being that they typically have an awful lot more supplier/ service provider relationships to manage than they did before, and you therefore have a huge volume of 'permissioned' advertising being squeezed into what amounts to a very small amount of time.
In that respect, our job is to build tools that help get a better return out of those 28 minutes, and maybe even one day increasing the time spent because the return on it is much improved.
Iain
3.2 hours a week is 192 minutes, or almost 28 mins per day.
On 17 Feb 2013, at 15:28, Katherine Warman Kern <
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Sylvan and Chris,
As a practicing planner who takes pride in being a trusted advisor, I'd like to share some insights from the perspective of my clients.
The reality the consumer has an overabundance of choices and a marketer has an overabundance of tools to choose from.
But the number of hours in a day to make those choices has remained exactly the same.
As the number of choices have increased, the odds that bad choices are made increases.
Share of Voice, as many measuring sticks, is flawed from the start because there is no truly accurate way to measure or project it. One marketer can spend the same amount of dollars much more effectively than another. And since few marketers publish their mistakes, no one really knows what really happened. In fact most published accounts of marketing case studies have very little resemblance to what really happened.
I continue to be shocked that no new entry capitalizes on digital technology and social media to offer an improvement over Nielsen to monitor integrated marketing in real time.
K-
Katherine Warman Kern
www.comradity.com
@comradity
203-918-2617
On Feb 17, 2013, at 9:37 AM, sylvain willart <
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> wrote:
This "tragedy of the commons" made me think when you first posted about it.
The sheep example you mention is well-studied in economic game theory,
and there are some writings as well in Public Economics sudies dealing
with scarce resources,
But I very rarely read this kind of thinking in advertising/marketing.
Only perhaps in "Store Wars" (Corstjens & Corstjens , 90's). Actually,
the hypothesis of the consumer brain being a scarce resource is
sometimes discussed, but never measured. And media planning relying
heavily on measures and metrics, this hypothesis does not well fit in
traditional approaches.
Moreover, you can expect people to protect scarce natural resources
(even if they loose direct advantage) for the sake of a "bigger cause"
involving altruism (a long studied effect in game theory); but who
really cares about the exhaustion of conusmer brain? there is nothing
here a good night of sleep can't fix... (the consumer himself may be
the only one to care, hence the importance of VRM tools IMHO).
Media planning is also competitive by nature, and while planning you
have to care more about your competitors' expenses than your
consumers' ability to process all those ads. An important metric in
media planning is for example the "share of voice" (your expenses
divided by the market expenses), perhaps the dumbest metric ever
invented, as it is known from long it is not robust at all (meaning it
can lead you to make stupid planning choices)
The entropy hypothesis however may be quite appealing, and this metric
is often used in other field of marketing (for measuring variety of
assortments for example). I'll try to dig into it to see wether it has
been used in advertising/intrusiveness research.
Sylvain
2013/2/17 Chris Savage <
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Sylvain,
Thank you, this is very helpful. I will ponder a bit more.
I have mentioned, perhaps on this list, my sense that there is a "tragedy of
the commons" effect going on among those who would sell me stuff. Just like
in the Garrett Hardin story where each shepherd looks at the common field
and thinks, "Oh, letting one or two extra sheep from my flock graze won't
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