Hopper Analytical - VRM

The Customer Wants a Divorce

Sat, 22 Mar 2008 16:32:45 -0400

"The Break Up" video has been around for about a year, but it's so relevant to what we've been working on with Project VRM, I couldn't resist posting it. Produced by Microsoft (of all people) along with ad agency openhere.be, the short video is a brilliant slam on how the traditional approach to customer outreach is woefully out of touch. It basically runs like an ad for The Cluetrain Manifesto.

The video is by Geert Desager and originally posted at bringtheloveback.com.

Shifting Tolerance in a Hybrid Economy

Wed, 9 Jan 2008 15:34:45 -0500

In a neighborhood near my home, there is a school playground with an enormous three story chain link fence along one side – presumably as a barrier for errant basketballs. The fence is constructed inches away from an adjacent home. I thought to myself "that would suck - I would probably rather have broken windows than live behind that huge fence". Then I thought of all sorts of examples of aggressive organizational behavior in our society that is tolerated, even though their behavior could easily be perceived as unfair or intrusive. I'm not suggesting that all business behavior is universally tolerated, but rather that their fundamental commercial presence is often quietly accepted. For example, we forgive the school's fence because we deem urban play areas for children are worth the tradeoffs. We also forgive Apple's fierce closedness, Google's ads, and Nike's ubiquitous branding. What's most interesting to me, however, is that we don't have a single standard for what is tolerated. There are some interesting nuances here. For example, I doubt my neighborhood would have tolerated a condo developer building a fence like that, and ubiquitous branding around your religion’s holiday is generally frowned upon.

Looking carefully at our culture's relationship to commerce, every business in some way lives on an unspoken agreement by the community to tolerate an incursive aspect of its existence (I'm presupposing that of course businesses provide meaningful value to customers ahead of their potentially invasive aspects).

Now consider our emerging hybrid economy. An organization operating in this new hybrid economy sits between the commercial economy of financial transactions and the sharing economy that thrives on free and open distribution of value (think of sharing as found within Wikipedia and Open Source Software). Take Google - a business operating in the hybrid economy with, among other things, YouTube. They rely on people openly sharing video content while they generate revenue from the accumulated eyeballs.

The emerging hybrid economy now shines the spotlight more brightly on a business’s tolerated behavior. If people don't embrace all aspects of a business, individuals might not just stop buying their products, they might stop sharing, which is an altogether new and potentially more disastrous fate. Rejection of a business would mean defection from its associated shared commons – to the detriment of society, not just specific product consumers.

The obvious question becomes then, how do you construct a business that leverages a hybrid economy without poisoning the sharing and good will? Where can these businesses carve out a profit and advantage around commercial behavior that is culturally tolerated? What specific aspects of hybrid businesses are required to facilitate social tolerance?

When the Customer Sets the Price

Sat, 20 Oct 2007 15:55:17 -0400

As you have no doubt heard, Radiohead skipped the middleman with their latest release, offering the album online for download. This resulted in an estimated $10 Million in profits from 1.5 million downloads over the past week, more than the first week sales of their last three albums combined. Not too shabby, particularly when users could set their own price for the download, including being able to set the price of nothing. Radiohead's VRM-like experiment did trigger a flood of promotion, but at the end of the day, fans still volunteered to cough-up an average of $8 per album. Gets one thinking, don't it?

We will undoubtedly see more stunts like this to promote online sales, along with an increasing willingness to go cheaper and wider by offering digital downloads for free. But I want to know, will we see more customer-driven price setting? It feels a little like a public radio pledge drive, essentially asking the customer at transaction time - what is this worth to you? Applying this sort of purchasing model to product transactions is one approach that the VRM project is exploring - where the customer takes a more proactive stance in setting the relationship terms with vendors. Doc Searls introduces this idea in the context of public broadcasting at the tail-end of a Berkman.tv video on the future of public media. Don't miss the first part of the video either, as Jake Shaprio takes on predicting the future.

Why VRM is Good for Business

Tue, 9 Oct 2007 13:28:51 -0400

Conversations around VRM often include impassioned demands for more customer control. We live in an increasingly decentralized world with more customer choice, yet vendors continue to fiercely collect and control customer data and exploit the opportunities therein. It is no surprise that VRM can serve as a rallying cry of sorts for frustrated customers wanting to take back control from vendor lock-in, offensive communications, and privacy and security concerns in a world of mishandled personal data.

However, rooting the VRM opportunity in us vs. them, emotionally-driven arguments is an unlikely way to pave a path towards better relationships between customers and vendors, and I believe better relationships is ultimately the goal of VRM. The more I learn about VRM, the more I hear about the importance of benefits for both the buyer and the seller.

The big question that remains then is, how is VRM good for business? As we consider and construct tools that put the customer in control of their data, how will existing businesses be convinced this is a good thing? And what opportunities are in store for new businesses that can leverage VRM models? In short, how will companies make (more) money in a VRM world?

Here are some initial thoughts. I look forward to fleshing this out if others have input.

Customers share the burden of storing and protecting the data
Vendors face growing privacy concerns from consumers, liability for breaches in security, increased compliance and awareness around the risks of data sharing, and just the plain old cost of data storage and management. Might there be an opportunity to reduce the risks and costs for certain businesses by offloading responsibility to consumers in exchange for their increased control? I suspect there are certain businesses, such as those in the healthcare industry, whose costs here are significant and may benefit from a fresh approach.

New opportunities for vendors who are unwilling or unable to benefit from CRM
Implementing CRM systems and making them useful can be expensive and time-consuming. CRM is a particularly difficult sell for new, small businesses that don’t yet have significant value tied up in their customer data or the capability to extract value from it. Additionally, the increasing prevalence of niche businesses in a long-tail marketplace suggests many vendors might be less interested in the benefits of mainstream marketing methods deployed through CRM. Instead, ideas like the personal RFP showcase the value of customer data that is not centrally managed by one-size-fits-all vendors. There are likely many unexplored opportunities here with the potential to reduce costs and create new opportunity for vendors while increasing choice and control for customers.

Increased access to information about customers
In a world where customers might extend access to their own data, there can be direct benefits to the customer to share more data rather than less. For example, customers may share information around the nuances of their needs and wants. With the ability to enforce anonymity and protection from solicitation, it is likely the customer might be willing to share even more about themselves (e.g. information about purchases across multiple vendors). Customers might share more because they know that this information could result in not only the resolution of a specific request, but also overall increased choice, improved products and services, and more efficiency in the overall marketplace.

Implied in all this data sharing is the possibility for vendors to access more information, learn more about shifting demand, and respond more effectively in the market. It becomes less about who can control the customer, and more about who can respond better to customer demand with better products and services. In this universe, everyone that brings real value to the table wins.

New opportunities for those who can leverage customer-controlled data to create value
Perhaps the most valuable area for opportunity is in unexplored, new services that stem directly from previously unavailable access to customer data. Opportunities exist for leveraging customer data to create entirely new types of value that go beyond mere adjustments to existing products and services. Imagine, for example, if individually-managed medical data was made available in support of massive research initiatives. Additionally, sharing personal data could provide specific value back to the individual. For example, what’s my increased risk to specific ailments based on my medical history as mapped to that of my family, my neighbors, and the world?

Vendors treat their customers like cattle and blast us with unwelcome messaging because it’s what they know how to do and frankly, it works. It’s unlikely that many vendors will stop this practice. But it’s also unlikely they will adopt new ways of relating to customers unless we provide them with methods that reduce cost and increase opportunity while satisfying the customer’s need for greater control.

The Long Tail of Consumer Demand

Thu, 3 May 2007 22:23:52 -0400

Thanks to the Project VRM team, I now understand the concept of a personal RFP (Request For Proposal). The idea is simple: have the individual consumer dictate what they want and at what price. Let the vendors who can match this need come to them rather than the other way around. Product marketers currently have an annoying habit of telling us what we need and then inundating us with a sea of unsolicited communications around products we may not want. Removing this vendor behavior would reduce an unwanted advertising burden on the consumer (annoyance) as well as on the marketer (cost). This should decrease total unit costs, and by extension the cost to the consumer.

A Project VRM participant (I believe it was Chris Carfi as referenced here) suggested that Google’s AdWords already is a great a vendor matching tool for highly-personalized consumer requests – albeit around the broader realm of information rather than more specifically of products (I’m paraphrasing). I think he was implying that an AdWord ad is a real-time response to an individual's "three word RFP" (e.g. keyword search).

Leading up to this insightful comment, I had been noodling on who might be the perfect VRM vendor. If we found a good fit to sponsor a VRM initiative, the solution definition and adoption would be a cinch. The secret is to find a vendor with a unique customer acquisition problem that can be best addressed by the VRM model – an organization that would benefit only if consumers were driving the relationship and a traditional vendor-consumer model just wasn’t working. This is essentially the crossing-the-chasm strategy for high tech products – focus on a vertical that is uniquely positioned to benefit from the format and structure of your solution. In essence, who is the perfect vendor candidate for what VRM could provide?

Traditional large product companies would probably be a bad fit for VRM. Their competencies are centered on creating narrow demand, not addressing widespread niche demand. Chris’s comment about AdWords got me thinking that when looking at a personal RFP, you are essentially looking at the Long Tail of demand – a big chunk of typical, common requests followed by an endless sea of nuanced consumer need. But large, traditional companies are experts only at The Short Head of product options. The combined forces of scarce shelf space and the economies of scale explains why these companies meet demand the way they do and are wholly unprepared to respond to individualized consumer demand. For example, scarcity of parking and the economies of mass production explain why you won’t find a convertible, hybrid-powered rental car with an MP3 player. For many existing mass-market products, these laws push less consumer choice into the short head of product options. In other words, they will not respond to the majority of personal RFPs. But then, who will?

I propose that those best suited to responding to niche, personalized RFPs will likely be those already in the long tail business, such as product aggregators like Amazon, retail aggregators like eBay and the thousands of specialized merchants currently relying on search and filter technology to drive personalized demand to their unique solutions.

Managing the Public Media Relationship

Tue, 10 Apr 2007 16:46:47 -0400

How can a public radio listener take greater control of their relationship with public media?

This was (more or less) the question posed to a public media-savvy group last week at Harvard’s Berkman Center. Led by Doc Searls, our ad hoc team explored how to equip the public media audience with a VRM tool to better drive their relationship with existing broadcasters, distributors, and shows.

Vendor Relationship Management (VRM) is the reciprocal to Customer Relationship Management (CRM). VRM explores the idea that individuals could create more value if they had better control over their vendor relationships rather than the other way around (my definition). The rise of participatory culture and its subsequent impact on vendors suggests an environment where this is not only possible, but highly desirable for everyone. Perhaps the long-term outcome of VRM will be to facilitate the dissolution of traditional consumer and vendor roles. Identity will be managed by the individual, but value production will happen across a spectrum of participants in a variety of capacities. In this environment, it will be difficult to define the meaningful boundaries of an organization, and what exactly constitutes an employee, vendor, consumer or producer.

A whole new generation of creative consumer has the potential to rediscover public broadcasting and co-opt it for its potential

But why public media?
Well, it feels like a good testing ground for something like VRM. If you are exploring the boundaries between organizations and the public, what better environment than one that is mission-driven to engage and serve the public?

There also seems to be a compelling overlap between what’s going on in participatory culture and what already exists surrounding public broadcasting. A whole new generation of creative consumer has the potential to rediscover public broadcasting and co-opt it for its potential as a non-commercial, open network designed explicitly to serve the public. I would ask, how can we encourage this?

...triggering more questions on engaging with public media in a participatory environment:

If we were to reinvent public radio in an end-to-end environment like the internet, what would it look like? How would it compare to what exists, and what important differences might emerge? What can we do to fill those gaps?
What does the long tail of public media look like? What are the democratized production tools, potential aggregators, and filters that drive demand down the tail?
As a creative consumer, what is it that I want to do with public media? What are my Lego building blocks, and what would motivate me to play?

In trying to answer these questions, one particularly promising idea that emerged was a model for a new type of public radio station - one that is not centered on broadcast. Such a station could have many of the traits of a participatory, web-based environment while leveraging the existing broadcast audience and media. In this way, we would have a transitional strategy of sorts – understood and embraced by traditional participants (both the audience and infrastructure), but able to transcend boundaries by reinventing itself from scratch, online, and with the public itself to steer its direction. These unique characteristics would drive important differences on how to fund, program, create, and manage its media. Without too much wild-eyed thinking, you could imagine an encouraging and experimental mix of user and collaboratively-programmed media, integrated online conversation, multiple device support, and a breadth of media types, alternative funding methods, etc.

Rethinking public media from a new, more participatory direction reveals an opportunity to redefine people-oriented broadcasting. And what’s more people-oriented than public media?