Re: Aw: RE: [projectvrm] Multifunctional Advertising

[T-Rob < >]

Hi Chris,

I believe there's two different things
going on here.  They overlap a bit but still fundamentally different
things.

One is the notion of externalities.
 The usual definition of an externality is to shift the cost laterally
but ultimately the cost is shifted in time.  Burying toxic waste doesn't
eliminate the cost, it shifts it to the future as medical and cleanup costs.
 Ignoring network security doesn't eliminate the cost, but rather
shifts it to the future as the costs of a breach.  This gets back
to the idea of accountability on different time scales.  There will
always be an incentive to shift as much cost as possible to future payers
outside of regulations that anticipate and correct for long-term outcomes.
 It's tougher to bury toxic waste now due to stricter enforcement
and higher penalties.  Unfortunately, still VERY cost effective to
ignore security because it's a Black swan event.

The other thing at play here is balance
of power in the relationship.  The pendulum has been swinging toward
the vendor side for quite a while now.  If you are caught stealing
a pack of gum from the corner store you risk severe personal and professional
consequences.  But if the same store overcharges you for 10 times
the value of that pack of gum, it's an accounting error.  Every contract
the typical consumer signs (clicks) is a contract of adhesion.  And
if you should decide to get justice in court, you find that it goes to
he who has the biggest war chest and the loser risks financial ruin.

I don't hear anyone claiming VRM will
eliminate all externalities.  However it does promise to shift the
balance of power back toward the consumer.  To the extent this is
possible, early vendors will enjoy increased market share and profit from
the "enthusiast" market who are in fact willing to pay extra.
 But as the model reaches maturity, instead of enjoying a top-tier
market VRM will become the norm and vendors not adopting it will realize
a penalty.  At that point it won't command a premium but will be part
of the regular cost of doing business.  The overlap is that VRM takes
what is currently an externality - customer intent - and accounts for it
in the market.  These benefits are not mutually exclusive with the
continued existence of other externalities relating to product quality,
price sensitivity or running your server without security enabled.

-- T.Rob




From:      
 Chris Savage <
 >
To:      
 
 ,

Cc:      
 
 ,
"'Iain Henderson'" <
 >, 
 
Date:      
 02/18/2013 09:35 PM
Subject:    
   Re: Aw: RE:
[projectvrm] Multifunctional Advertising

---

This discussion actually raises a link between the potential
for customer-centric enterprises and the Gini coefficient.

Let's assume that customer-centric enterprises are more costly item-for-item
than cutthroat capitalist exploiters of the downtrodden workers and consumer
masses.  (Or something like that... <g>)

On that theory, in order for most folks (as opposed to "the 1%"
as they were called here in the US for a while) to enjoy the benefits of
a customer-centric vendor, they have to be both willing and able
to pay more for the superior experience.

It follows that the more skewed the income distribution in favor of the
1%, the harder it will be for customer-centric vendors to survive, because
the pool of people with sufficient above-subsistence income to spend, even
in part, on the service inherent in customer-centricity will be smaller.

Hmm.

Chris S.




On 2/18/2013 5:55 PM, 
 
 ">
 
wrote:
Hi Katherine

I would like to shop at customer-centric
companies too. And sometimes I do. My local coffee shop just over the road
from my banking client in Bishopsgate for example. But as a recent article
in Booz & Cos Strategy+Business points out, most consumers choose value
over values when push comes to shove. 

We all love to work with superior clients.
Superior in their customer-centricity, superior in their offerings and
superior in their profitability. But most of the companies with most of
the money are none of these things. Or at best only in one. Trader Joes,
Whole Foods and Zappos are tiny squibs in comparison with the behomeths
Safeway, Walmart and Tesco. All of these dominate their sectors due to
core competencies other than their customer-centricity.

If VRM is ever to become a force to be
reckoned with, it will have to offer a superior and proven economic model
than the ones offered by companies like these, not to the interesting B-School
case studies like Trader Joes.

Best regards from Cologne, Graham
-- 
Dr. Graham Hill
 
 ">
 
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 21:30 Uhr
Von: "Katherine Warman Kern" 
 
 "><
 >
An: "'Graham Hill'" 
 
 "><
 >,
"'Iain Henderson'" 
 
 "><
 >
Cc: 
 
 ">
 
Betreff: RE: [projectvrm] Multifunctional Advertising

+1 Graham. 

 

Iain, as a consumer, I vote with my wallet.  I want a business who is customer-centric to succeed and hire more or better people to continue to improve their service.  I have no problem with this business making a handsome profit. 

 

But if a business profits at the expense of others – even if their profit is marginal  - I will vote against them.  I use a local community bank, for example. 

 

I know of a company who launched before FEDEX in the express mail business.  They invested in a lot of great people and infrastructure all over the world, but could not maintain that human resource and infrastructure and compete on price with FEDEX.  Instead of cutting costs they changed strategy by serving customers who could take advantage of their superior human resources and infrastructure.  This company grew beyond the founder’s wildest expectations and he shared the profits with all those people he held on to instead of cutting because they made the strategy work.  

 

As a marketing consultant, I prefer clients who make a product which is superior for customers and customers are willing to pay a premium for it.  It doesn’t take as much effort to come up with great ideas.  The media costs are lower because it doesn’t take a lot of frequency to get the message out and see a result in the cash register.  So I make more money too.  Everybody wins.

 

K---