Retailers, travel sites, and other threatened businesses need to get over their pity party and start thinking about customer needs.
The year ended with retailers howling at Amazon, travel sites claiming that Google is taking their lunch money, and AMR using bankruptcy as a strategic cost-control program. These businesses showed that they were focused on protecting their own interests, rather than delighting customers. They got it wrong.
These businesses forgot that their customers, rather than gaming the system, are the key to their success.
This problem isn't new. As far back as 1939, the science fiction writer Robert A. Heinlein wrote about a similar impulse in the short story "Life-Line:"
There has grown up in the minds of certain groups in this country the notion that because a man or a corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary public interest.
Steven Denning writes in a Forbes magazine article, "In the real market, there is opportunity to build for the long run rather than to exploit short-term opportunities, so the real market has a chance to produce sustainability." He quotes Roger Martin, dean of the University of Toronto Rotman School of Management: "We must shift the focus of companies back to the customer and away from shareholder value."
How do other companies strive to delight their customers and build loyalty?
They acknowledge their challenges and move forward. Both Google and Facebook agreed to 20 years of FTC privacy audits. The companies took hits because of the mistakes they'd made. However, the audits might work to their advantage by giving something of a federal imprimatur on their privacy practices. Instead of launching a public relations campaign about the unfairness of it all, they accepted their probation and went back to work.
Similarly, Google's move into the travel business was nearly tripped up by federal probes and chaotic relationships with airlines and other travel sites. The airlines demanded more booking links in exchange for flight data. Google complied, giving a boost to the airlines at the expense of other travel sites. As the Wall Street Journal points out, "There is no sign consumers are being harmed by Google's new features."
Martin describes the direct way Johnson & Johnson recovered from the Tylenol tampering and reestablished customer trust in the safety of its products. That response has become the textbook example of how to deal with a product and PR crisis.
They empower consumers. Fellow blogger Mitch Wagner writes that Amazon is playing a dangerous game by encouraging consumers to use its Price Check app to compare prices in stores. News reports about Amazon's promotion gave voice to every business owner who felt threatened. A few politicians joined in the outcry.
The only people who weren't complaining were consumers, who tripled their use of the app the weekend of the promotion. Customers could compare prices and decide whether a lower price was more important than the satisfaction of carrying their product home immediately.
They choose quality over raw growth. Outgoing IBM CEO Sam Palmisano sold the company's flagship PC business to Lenovo in 2002. (IBM is a sponsor of The CMO Site.) In a profile in Sunday's New York Times, Palmisano said he believed the company could build better products and services without the business. A decade later, both IBM and Lenovo are thriving.
If customers hear a message that businesses care only about themselves and their profit margins, they will respond in kind and chase the lower price. Meanwhile, Apple stores generate more profit per square foot than any other retailer.
Lawyers, lobbyists, and a bit of sympathetic outrage from business owners may win a few skirmishes, but berating consumers for their choices is no path to long-term success.
- Karl Hakkarainen is an independent consultant who works with organizations and professionals in healthcare, law, education, and social services for whom marketing is a novel and somewhat suspect venture. He applies his 30+ years of connected communications to help them tell their stories in ways that fit within their traditions and the laws of their professions. Karl is a graduate of Amherst College and of Mount Wachusett Community College.
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My video today discusses this issue from another angle.
Not every company is going to be able to support the kind of high-touch sales that Trikke is doing. But some will be able to.
Merchantsi tend to look for the answer to competing witj Internet vendors. But there is no one answer. Different businesses will find different answers.
I'm not sure how I missed this thread a few days ago, but it's fascinating. One one hand we are dealing with the ever-changing marketplace, largely the result of computerized, digitized and internet-ized retailers changing the playfield immensely. But then there's also the aspect of consumer opinion of these various retailers and how that plays into things.
You have the Apples of the world which are largely viewed as delivering exceptional products and therefore its fans don't mind the price so much, even if the products aren't as exceptional as people believe (several generations of iPhone come to mind in which mere contact with the face would disrupt phone service).
Then there are the Walmarts which are viewed as cutthroat by vendors dealing with them (they nearly put Vlasic out of business a few years back due to demanding products at a ridiculous price point), but from a consumer standpoint, their prices are hard to beat and many things can be bought under one roof. Consumer view of Walmart is mixed due to great prices but terrible employee- and vendor- dealing practices.
The Amazons are hard to beat in the online marketplace as they do things better than most companies. They even handle or have handled inventories for other large companies which couldn't handle it as well on their own. Amazon does want to receive products from vendors at a ridiculous wholesale price, but the difference isby selling it through amazon but as their own entity. Consumers tend to view amazon as the go-to shop for nearly everything, checking prices there first. They have consumer confidence sewn up.
It's interesting that amazon has released a price-checking app into the world; I for one, if finding a book in a shop, would just buy it at the shop rather than go online, order it and pay for shipping, waiting days. Brick and mortar stores are still great for instant gratification, and I like supporting them if possible because, well, shopping online is just not the same pleasurable experience as leafing through books in a great bookstore. (That's not to say I don't shop at amazon, because I do enjoy the site a lot. But I do miss Borders!)
John, to your earlier point about the salesman going to the trouble of educating the consumer, only to lose the sale to the cheap online store -- I assume that's the issue you want to agree to disagree on. But I encourage you to continue to pursue the point; I always find discussions with you educational and insightful.
In discussions like these, there is often one side looking to basically preserve the current business environment in the face of technological disruption. And that's just not going to happen. I don't think it's possible, or if it is possible the only way it can be done is basically to institute a police state, which of course has its own undesirable consequences. The wheel of progress seems to grind inexorably forward.
And you're right -- there will be social costs. One of the main reasons for the disappearance of the middle class in the US isn't corporate greed or government bloat (to name the favorite whipping boys of, respectively, the left and right). The middle class is dwindling because middle class jobs have disappeared. Not just shipped overseas -- although that is some of it -- the jobs are just gone. There is not much call for typists or keyppunch operators or bank tellers anymore. These used to be jobs that a person with a high-school education could do and make a pretty good middle class living, and now those jobs are gone.
Historically, we've seen the same thing happening in the office. In the 19th Century, a person who had readable, attractive handwriting and could do basic arithmetic could get a decent job as a clerk. Then, starting late in that century, the handwriting began to be replaced by typewriters, and later still the arithmetic started to be done by adding machines.
And the same is happening in retail. Cashiers and salesclerks and stockboys and other apparatus of retailers are going to lose their jobs, along with the folks who work at the mall Orange Julius and video arcade. And that is seriously bad.
I admit this discussion has become only tenuously related to marketing, and that's fine. But here's the marketing connection: It will be up to marketers to drive demand for the NEW business models, which will then create new jobs for those people. Not the same jobs in new places; they'll be doing different things. But it will be gainful employment.
I had an experience this weekend that relates to this, shopping for a recreational vehicle called a Trikke. I've done a video about it, which should be going up on the site today or tomorrow or so.
Well, back from a weekend and I discover that I'm distinctly a party of one around here, so I think that rather than frustrate the rest of you, I shall just agree with myself to disagree with everybody, rather than take up bandwidth in a staring contest ....
Barbara, you've raised the issue that I think is the core of it: in many industries, and perhaps it is clearer in music than in most others, a tremendous amount of what we think of as "normal" is actually just an artifact of the buying process. When it cost no more to press an LP than a 45, the album was king because you didn't have to pay the musicians any more and you could charge a much higher price (and 45s still had a higher price relative to expected value, because there was a good chance you would hear several of the songs on the LP for the first time after buying it). Pop music became mostly album-oriented. The expansion of the size of pop-entertainment novels from about 50,000 to about 110,000 words between 1950 and 1985 is another example; it was easier to ship, pack, track, and sell thicker books for a complex bunch of reasons -- it wasn't that all of a sudden everyone who had been reading Balzac-length books suddenly wanted Trollope-length. And the serious shoe and clothes collectors I know are all grumbling because things don't feel and smell as rich as they once did and often are not as well-made; it turns out that was part of the "store-floor" appeal, and since it's unavailable on line, it has begun to fade.
So customers are able to buy things in new ways -- one song at a time and always being able to preview; books at any length instantly; shoes by brand/size/general silhouette at any time -- and obviously many of them want to and businesses that enable the new capabilities are going to make money.
But there's still a third component in the relationship: the general social atmosphere to which marketing and selling contributes (some contributions being positive, some being negative). On the negative side, after a while, the songs that contribute well to an album but can't work as singles are written less and less, and fine manufacture of shoes slips away and becomes either available only at outrageous prices or not at all; on the positive side, the incentive to pad books so that publishers will take them has vanished, and many more books are coming out at the right length. Retail operations used to employ very large numbers of people who had to be able to read, write, and calculate accurately, and they were a market for various kinds of smart-people goods (including education for their kids).
As more and more of the basic work of retail is done by software, there is less and less need for medium-level brains, with consequences I have deep doubts about. Some people will simply not develop to the level they used to, some will acquire dumber tastes or just different tastes, some people with middling brains will take them and do something else with them -- but the proportions and consequences of those are at this point unknown. Maybe it just means it'll be hard to find a chess partner on Saturday afternoons, and the crowds will be bigger at monster truck rallies; maybe it means the votes won't be there for local schools; maybe it means the creation of a revolutionary class ...
Your comment brings up Mitch's remark in an earlier post regarding, " . . . how many unlikely items prove successful online. Shoes, for example." Shoes, books, clothes, makeup have always been designed for their tactile and visual appeal, unique detail, packaging, and in the case of clothes and shoes, designed to be experienced a multi-dimensional context, look good, and of course, fit. Yet these have been some of the leading online categories, which to date has been a one-dimensional media with challenged color and is virtually nuance-free.
Disruptive technology isn't necessarily about delivering to us what we want as we now understand it, but about fundamentally changing the game. In the case of online retailing that means among other things, access to infinitely more of what we want in ways we couldn't have achieved otherwise. The consumer can now evaluate, purchase, and receive items in ways that are profoundly different, literally redefining what we want.
Think about how radically (but simply) iTunes changed how we buy music. It gave us the ability to buy one song at a time at an affordable price for virtually everyone. Prior to iTunes, we bought an album with 12 or 14 songs at one time, at a cost 12 or 14 times more, with songs we didn't really want but were forced to pay for. That's the promise of disruptive technology for the consumer (or user in a B2B environment).
Think back about when this has been used. It changes the landscape and potential immensely. It gets the comfortable shake a leg because they know they're about to lose their edge. Good things happen when some spice is thrown onto an industry. All power to the Amazon's & Zappos' of the world that do what they must to provide products and serivces that WE, the people WANT.
I was wrong about penny shipping. I must have been thinking of cheap shipping and Amazon's penny price for cell phones with contract renewal. I see 97 and 98 cent shipping on Walmart.com.
Apple's always an excellent example of businesses that thrive on quality, ignoring price. There's something about change that causes fear. A lot of busimesses are initially scared of technologies such as price checking but in the long run everything should come down to a balance.
Inevitably though, some retailers will get competed out due to this technology if they are neither able to offer superior quality nor lowest prices.
@tinym what you say about Walmart makes me wonder if there are regional differences in its policies. I don't recall ever seeing penny shipping on its site, though some items will ship for just 97 or 98 cents, some amount like that -- completely worth it for a heavy air conditioner. A few items ship free, and just about everything can be shipped free to the store for pickup.
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is an independent consultant who works with organizations and professionals in healthcare, law, education, and social services for whom marketing is a novel and somewhat suspect venture. He applies his 30+ years of connected communications to help them tell their stories in ways that fit within their traditions and the laws of their professions. Karl is a graduate of Amherst College and of Mount Wachusett Community College.
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