Customer expectations – The Great Vine

July 23, 2015January 24, 2017

The web and consumption in emerging markets

With the ongoing worldwide recession many companies have put their hopes in emerging markets but for some the results have not lived up to their expectations, are taking much longer than thought or seem imperilled. The view from the web can help us put things in perspective and find specific opportunities for the right product mix and distribution channels.

Will China’s consumption take off? Will Brazil shrug off its recession? How can we grow more in Mexico? These are pressing matters for companies that have invested in emerging countries and now depend on them for their results. Seen from the perspective of the connected consumer we can see several opportunities:

What’s our customer’s experience as a consumer?

Closed, State led, corporatist economies left behind consumers, who made do with what was available locally, whether it was good or bad. The moment the economy opens and / or consumers are exposed to other possibilities thanks to the web, they leave old, stale brands behind to embrace what’s better or simply different.

The opportunity for multinational brands is to earn customers’ trust by offering choices which are clearly better than what they are used to, which represent the state of the art they can aspire to, or the best at their budget. This is a serious advantage when the competition is used to being a monopoly that treats its customers as barely tolerated pests.

[boxright]In some cases consumers would prefer national brands for patriotic reasons, in others anything foreign is automatically considered better, and brands will need to navigate these cultural peculiarities with care. For instance while many Mexicans would prefer to buy a national product they also traditionally thought of “made in the US” as synonymous with “better”, not because US products were the very best but because national products were so very bad; with the opening of the economy in the 1990s Mexican consumers have learned that the very best might come from other countries and that there are also bad US products, while many national brands were bought or disappeared altogether. The opportunity lies in earning our customer’s trust, and while some segments will buy national or foreign products regardless of their actual quality, the vast majority appreciates what’s done well.[/boxright]

The risk for multinationals is to repeat the same patterns as the local competition and become part of the oligopoly. We might be the biggest ice cream producer or the biggest eyeglasses manufacturer in the country, with healthy economies of scale and stupendous control of our supply chain, but it doesn’t mean our consumer appreciates o even understands our product – which means an opening for other brands.

How can the web help?

We can draw up a comparison with our competitors along our customer’s journey in terms of satisfying her needs, beginning with the basics of safety, hygiene, identity, and establish which specific value drivers our brand can own.
We need to take stock of our customer’s online journey, how it is exposing her to new products, prices and other consumers’ experience, as her purchase decision is increasingly being taken before she even steps into our traditional channels. We need to establish how much traditional marketing and distribution channels contribute to the sales funnel and trim them accordingly.
We need to use the web to be part of our customer’s conversation.

What’s our customer’s probable evolution as a consumer?

All economies have undergone an evolution in terms of consumption, and we can apply this experience to new markets. Customers have gone from conspicuous consumption (Bling! Cheap clothes!) to utilitarianism (Why do I have so many pants?), from conformity with what’s available locally to higher expectations (Customized fit, lower prices, durability, worker’s conditions), from mere transactions to participation (I would buy these pants again if they were available in grey).

The opportunity is to segment our customers according to their expectations, depending on this experience with consumption, their disposable income and aspirations, and adapt our value for each of these segments. A good example is how Audi and other car manufacturers have adapted their models to have more rear seat space in China, but there are many more opportunities beyond luxury.

We can then anticipate our customer’s probable evolution to adapt when some segments outgrow their original expectations, others are saturated or suffer external shocks (such as China’s fight on corruption and its effects on luxury goods used as gifts).

How can the web help?

We now have a medium through which our customers can tell us directly what they are looking for, what they are and are not finding, how much they are prepared to pay for it. This is an invaluable tool for our segmentation and product mix as we can take the guessing out of the equation.
The web can also help us deliver much of this value, from recommendations based on up to date profiles, previous purchases and what others are buying, to group purchases, to the pre purchase of special runs.

September 15, 2014January 24, 2017

Sony’s flawed beauty

Analyzing a a polished brand like Sony from the perspective of the connected consumer can help us understand its predicament and any possible solutions, as well as our own.

What makes a beautiful sound? An experienced player who can go beyond mere technique, with a good instrument, in an acoustically ideal place… Heard by someone utterly bored by the score?

The question is rather: what makes a beautiful sound, to whom? In the old, monolithic world the virtuoso should be appreciated by the cognoscenti. Anyone not able to appreciate not just the music but the hard work behind it was simply an ignoramus. And while ignorance is still not a virtue, and should not be fawned over like most mass media do, we all have the right to appreciate quality differently. Someone who doesn’t try to appreciate something is a fool; someone who tries but doesn’t find it to his liking is within his rights.

If you think everyone tries to appreciate quality here are some counterexamples: is wine foreign, “frenchie”, not something real men drink, even if it happens to taste good? Is it something that implies sophistication, which you should pour with care and ponder, even if it tastes dreadful? Or is it something you can discover to make up your own mind?

What makes a good TV? A good stereo? In the old world engineering prowess and the opinion of experts counted, never that of the consumer. And this was all the more important in a world filled with substandard products, with shysters ready to gouge innocent consumers with over priced, unreliable, toxic junk.

But then the world changed. Consumers didn’t only have the opinion of sales reps and specialized magazines, they had each other. And lo and behold, soon they could know more about the product than either the hapless store clerk or the so called expert. The topics went far beyond what even the most seasoned technician could know, for they were about what mattered to consumers, like the colour of the device under different lighting: the experts didn’t know or simply didn’t care, for an expert has a social standing among his fellow experts and cares about gigahertz, surely not about how it looks in grandma’s living room.

Our consumer might still not be a technical expert, in fact he might not know exactly what’s best for him, but he has discovered many more aspects that do matter to him, and he’s hearing about them from the horse’s mouth: other consumers just like him; and it is in this world of new expectations that companies need to compete today.

As you can expect, it’s not a pretty picture, with the vast majority of companies stuck with the tired marketing methods of the old monolithic world: Customers are asking for reliability, durability, whether a product’s colour is more yellow grey than blue grey, all companies can offer is “New!”, “Sale!” and technical details such as megapixels and gigahertz which the customer doesn’t fully understand.

The other side of the coin is that this represents a unique opportunity for companies to escape competition on price alone, particularly when facing lower cost competitors.

We can try to understand the predicament for Sony and everyone else from this perspective. What made a Sony Walkman an icon but a Sony MP3 player a sales fail? What makes a Sony mobile phone an also ran?

There are other aspects such as more fierce competition, but part of the problem is that Sony has had to compete in broader experiences, and not just in products; it’s not as if the company was blind to this, and in fact took steps to incorporate content and its distribution through its purchase of movie and record companies… Only to find that the competition offered consumers the chance to download music “for free”: No piracy, no iPod boom, but by itself that doesn’t explain all of Sony’s MP3 player problems: customers who actually bought music had a terrible experience transferring it to the players because of the clunky interface, clearly the company couldn’t extend its amazing industrial design to its equivalent in software; and at the time Sony needed to go beyond this, to encourage and facilitate music discovery and purchases, which Apple eventually managed to do with iTunes.

The connected consumer has made the experiences Sony competes in even broader and deeper; it is notorious that customer’s expectations have diverged wildly from the brand’s response. What makes Sony a particularly interesting case is that the company keeps producing great products, which its customers aren’t able to discover or use fully.

The case of the accidental Sony earphones.

Take the case of a consumer who grew up with audio CDs and is suddenly faced with the dreadful prospect of worse sounding music through iPods and their included earphones: he starts looking for alternatives, and in the myriad brands stumbles upon a Sony product, which with the included earphones sounds much better. Later our consumer wants even nicer sound, and starts looking to upgrade his earphones, or even to get into headphones. He has specific questions such as “what would be a definite improvement?”, “what’s a reasonable price?”, and not being an expert is missing important variables such as “not all MP3 players can drive all headphones”. Sony’s response? New! Big bass!

But our consumer is stubborn and carries on with his investigation, during which he stumbles (seeing a pattern?) upon Sony earphones (say the XBA-4), and crucially upon other people’s experience with them. They seem interesting, but are much more expensive than what he is willing to pay, and has the nagging impression that Sony charges more just because of its brand caché. He archives this model in his head and starts to decide between a Yamaha and an Audio-Technica in his price range.

As he prepares to purchase one of these, he decides to do some last minute, quick side research: those XBA-4 wouldn’t be available locally, would they? Surprise surprise (for his local retailers usually have old and overpriced models), they are… At half price… At a stodgy department store whose web site barely works. What to do? Go with the safe models, buy from reputable online sellers, or take the risk that he’s actually buying a blender through the clunky seller, or even that his credit card details are stolen?

Our consumer takes the plunge. The earphones arrive and they sound amazing, so much so that music becomes once again a pleasure to listen to, he starts buying more music and eventually buys another MP3 player from Sony. Much to his horror he also discovers that these same earphones sound merely “ok” or dreadful when connected to his phone or his stereo, in other words even if the earphones are good the overall experience might still have been bad.

Here are some conclusions we can draw from this example, which apply to everyone:

Our product might have cutting edge industrial design and technology, but our customer’s experience around it, from when he looks for it, to when he buys it and uses it might be horrible, fraught with doubt and dangers.
Our customer has many questions which traditional marketing and our in store staff cannot answer; we could step up our staff training programs to improve technical proficiency but they would remain out of sync with our customer, and in any case his experience begins before he even sets foot in a store: by the time he gets there his mind will already be made up. Answering through the medium our customer is using, the web, would mean sales and a competitive advantage.
Our customer’s access to other consumers’ experience is opening their eyes; these are not “pundits” but regular consumers whose shared experience points the way to the important stuff as well as the myriad minutiae which make up an experience, and may not be important to everyone but are bound to be important to someone – perhaps to our customer. You can now see why those poor companies that put a blogger or Facebook jockey in charge of their social media projects have fared so disastrously.
The one size fits all approach from old marketing isn’t going to cut it when we need to respond to our thousands of customers individually. This doesn’t mean that we need to be everything to everyone, we need to establish an online brand persona through our customer’s self service experience.

Sony still needs to master research and development, industrial design, manufacturing and distribution: these are necessary but no longer sufficient. Their customer’s experience is now much wider and growing and they cannot expect technical excellence by itself to win customers over. While this may sound like a daunting task, the flip side is that it represents an opportunity for Sony to attract customers on the merits not just of its products but of the overall experience around them, something lower cost competitors will be unable to do.

The first step for Sony and the rest of us is a change in mentality: our customer is out there, already looking for our product; is he discovering the best according to his budget? Does he know where to begin? How to grow? How can we help?

The second step is to establish how we can cultivate this knowledge, at all touch points and then among our different internal departments, to then be part of our customer’s conversation on the web.

September 10, 2014January 24, 2017

Analytics and the web: trust vs coupons.

Summary: Business Analytics represents a set of tools which has evolved from Data Warehousing and Business Intelligence to Big Data, with some proposing Analytics 3.0 as the next big thing. Understanding its evolution from the perspective of the customer centric web can help us see its real value and limitations, and where we should be investing.

How can we control our business better? How can we plan for it, particularly when it’s a large enterprise with many products and thousands of customers? This question is behind the evolution not just of Business Analytics but also of many advances in IT; we can summarize its development in the following table.

	Analytics 1.0.	Analytics 2.0.	Analytics 2.1.
Name	Data Warehousing, Business Intelligence.	Big Data	Information rich offerings.
What it does.	Gather and analyze operations data: point of sale, inventory, customer contact.	Vast data sets, much more powerful number crunching.	Use Big Data to improve operations and transactions.
Who uses it.	Most big companies.	A few big companies	Very few companies.
Weak points.	Stuck at reporting, seeing past trends, not actual analysis. Expensive and difficult to use for small and medium sized businesses.	An end in itself? Correlations, not causality.	Follows data, not actual customers.

Analytics 1.0 had to innovate to gather all the information from operations, with the help from mainframes and later PCs; going from paper to computers meant a huge advantage in reducing costs, improving efficiency and controlling companies; as Davenport recalls, the most important task was always asking the right questions, to establish which information we needed to be gathering and analyzing, since these were such arduous, time and resource consuming tasks.

Most large companies use these tools in some way, although Business Intelligence has really mostly meant reporting about past operations, which is very useful but a long way from actual predictions. This sort of data gathering, reporting and analysis is still beyond the means of most small and medium sized businesses.

Analytics 2.0 means Big Data: suddenly we have tons of information available, and not just from inside the company; we could have the information for weather patterns, pay days and shopper visits to our stores; and we have the means to gather and process all that information, going from single local servers to many on the cloud, with innovations like in memory processing. Some companies such as Google, UPS and the port of Hamburg have thrived by using Big Data

Analytics 2.1, which Davenport sees as 3.0, is about the use of Big Data and the change it requires from companies to include useful information into their products. It’s useful as it completes the information loop, but it’s more of a 2.1 change because we are still talking about what companies do with all this information with respect to their internal operations and in some select cases about their products, which can result in a huge competitive advantage like for Google and Amazon, and does require changes in the organization; but there is a bigger and altogether different phenomenon going on, and that is how information access is changing our own customers.

On the web our customers are discovering many more aspects related to our products, and they are finding about them from other consumers. In many instances the purchase decision is taking place without any intervention from brands or retailers: our customers find which products best serve their needs among themselves and only contact us at the moment of purchase. Their experience is taking a whole new life after the sale, as they exchange impressions and experiences, which affect our future sales.

Telescope

In the “old” 1.0, 2.0, 2.1 mentality we can track customers just like we can track our products and operations, with tons of information and processing power, to then seek to improve the efficiency of our transactions; and this is very useful and profitable, but it doesn’t deal with our customers’ new expectations. And those expectations aren’t only about our products but also about ourselves.

A useful real life example example is the poor girl who found herself looking for certain products which taken together denoted an upcoming baby: the data collected allowed Target to send her pregnancy related coupons, which had an adverse effect on her as (a) it angered her parents, which she hadn’t informed, (b) probably made her feel uneasy about being spied on, and (c) probably put her (and others who read the story) off shopping at Target: great use of statistics, complete marketing fail.

What makes the failure even worse is that our customer is more than willing to tell us what she’s looking for, if we only know how to listen and help her find what’s best for her, which goes way beyond price cuts, coupons and promotions; in fact she’s more than willing to help our other customers find what’s best for them. Making customers feel like they’re spied on and used is exactly the opposite of what’s required, which is to earn their trust, make them feel safe and valued. We need to take into account our customer’s expanded experience and our own place in it.

The wording in the NY Times magazine story is telling: Target was fishing for times when customers were “vulnerable to intervention by marketers” and wondered “How do you take advantage of someone’s habits without letting them know you’re studying their lives?”. If it isn’t already clear, customers don’t want to feel vulnerable or that they are being taken advantage of.

We don’t need “data scientists”, we need to know who our customers are, what they are looking for, why, how our product responds to their needs, how they find it, what they do with it; in other words we need to go back to the basics of marketing, now on the web. Business analytics and big data can indeed help, but they are only ingredients in the long term relationship we need to build with our customers.

	Analytics 1.0.	Analytics 2.0.	Analytics 3.0.
Name.	Data Warehousing, Business Intelligence.	Use Big Data	Our customer's use of data.
What it does.	Gather and analyze operations data.	Vast data sets, much more powerful number crunching.	Understand how our customer uses data.
What we can use it for.	Manage operations better.	Incorporate useful info into our products.	Respond to our customer's new expectations.

We can take these steps to respond to our customer’s new expectations:

Establish a centralized way of learning about our customers, including all touch points from analytics and Big Data. This is also the first step for other projects such as CRM, customer satisfaction and the web.
Establish how our customer’s expectations are changing, and how we need to respond.
Establish who we want to be for our customers on the web, not just what info we can gain from them.

April 9, 2014January 24, 2017

How the web affects our marketing: Effect on our customers.

To give us a better idea of how we can use the web more effectively we can look at its impact on our business through the classic Marketing scheme, as illustrated in the table below; in this first part we’ll be looking at the effect of the web on our customers (for consumer goods).

Analysis: 5 Cs	Value creation	Capturing value (delivery and communication): 4 Ps	Maintaining value
Customers	Market segmentation	Products and services	Client acquisition
Company	Select target market	Promotion	Client retention
Competitors	Product and service positioning	Price
Collaborators
Context

Why does our customer buy our product? How does he choose among products? Where does he buy it? These are age old questions which the web is changing as consumers are finding more answers about our products, mostly from other consumers, and because of their exposure to products and prices from around the world.

Cultural, social, personal, psychological impact.

As a mass medium the web is a source of general news, entertainment, a work tool, and is used for personal communication. As such the web is changing our customers’ knowledge of what can better satisfy their needs, as well as their aspirations. They are exposed to other products, other cultural perceptions of our product, can find the latest fashion before it is retransmitted by their local media. They can now belong to online communities for their hobbies or life styles which may go beyond what is available locally; and their own experience is useful to other consumers.

During their search they are also exposed to worldwide prices, which has an impact on their views about ours: Are they perceived as fair? Too high? Are they comparing the same products or services? They also develop views on the difference between what’s available locally and elsewhere: are the same products available? Are they available at the same time? If not do they feel treated as second class customers?

The moment of consumption also has an influence; I define this as the relationship between disposable income and consumers’ aspirations. For instance in a society which has little experience with general consumption aspirations will gravitate towards personal rewards and marking social status by showing one’s wealth; on the web this is confronted with other consumption moments, for instance one in which health and respect for the environment are appreciated, while social status is shown through craftsmanship, as opposed to mass produced products.

Language plays a role in keeping consumers in their silos, with english as a lingua franca that carries the cultural message mostly from the US and Western Europe, but now anyone from the cultural periphery can have a big impact if they choose their language and audience well.

To make sense of the influences of the web on our customers we need to establish the impact on their expectations, on our brand promise and on our delivery of that promise at each stage of their consumption experience, for the different segments we serve. We can already derive a few general lessons for our marketing:

Our brand promise needs to adapt to our customer’s evolving expectations, and we then need to fulfill this new promise.
We need to participate in our customer’s quest by responding, being relevant and useful, showing the way, earning their trust.
Our customers’ experience when they search online can be richer, which can work to our advantage if we want to compete beyond prices, as they are able to better understand the different product attributes, everything that is required to satisfy their needs, and even its social symbolism. We need to compare this possible richer experience with the one customers are currently having (do they only buy mainly on price?).
Our customer’s path generates information which is itself useful to other customers and may thus be highly valuable to us.
Traditional media which push messages at our consumers and are not part of their search have a limited impact on their purchase decisions, particularly when consumers have learned to tune them out; and this applies to old school ads on the web itself, which can also be easily blocked on their browsers and apps.
Digital, Internet connected, viral, social media which isn’t relevant to our customers quest is of little use to us; it may be preventing us from seeing the bigger picture and diverting precious resources.

The danger is that we find ourselves out of loop with respect to our customer’s expectations; the opportunity is first to be part of this conversation and align all our contact points, from the web to our brick and mortar stores, and second, to help our customer have a more productive, interesting, even fun experience with our product.

In conclusion: As marketers we have the opportunity to make a better contribution to our company’s results by using the web more effectively. The web allows us to have a direct, personalized communication with our customers, and in many ways takes us closer to the primary mission for marketing; the other side of the coin is that our customers increasingly expect more relevant, quicker answers, which other media cannot help us provide.

To do this we can take three steps:

Set our own expectations by taking a step back to understand how the web is changing our customer’s experience and expectations and how we can use the web itself to improve them. This will also help us decide on a budget and or marketing mix with other media.
Set our company’s internal expectations by uncovering specific opportunities and their web solutions, and establishing how stakeholders are affected by them.
Understand the resources required for web solutions, including a web project methodology which takes into account the functional differences between the web and other media.

February 27, 2014

Where we can be, where we want to be

Our customers’ expectations are changing as they are able to connect among themselves and get better answers to their questions. The web has enabled this change and can also help us meet the challenge; at the core of our response is our relationship with each and every customer as well as our online corporate personality.

Let’s follow our customer’s quest, comparing her expectations with the response she is getting from brands. At the very beginning, our customer has a set of needs which she expresses in her own way; she is not a product expert so she doesn’t know exactly what is best for her, what she should be looking for, what’s a reasonable price, in fact she may not even be certain of making the right questions.

With her new web powers she is able to fire off a few search queries which may result in some answers, depending on her language, the topic at hand, and how many other consumers have made the same questions before. The responses she gets from companies are ads and “marketing speak” which she has been conditioned to ignore from years of watching TV or reading magazines, and she gets more useful responses from other consumers, even if they don’t directly address her questions.

If she is brave enough she might even sign up on a forum, ask a question directly, and get different types of responses: some will chide her for even asking, others will offer what they see as the obvious choice (what they themselves have bought), and a few will try to be useful. In so doing she refines her quest.

She then decides she’s done enough research and goes to shops which sell the product she is looking for. Talking to the sales staff she quickly realizes she knows more about the product than they do, and that beyond price promotions and the latest models they are unable to help her further refine her own quest and decide what is best for her. Sales staff may have the very best training, the best motivation, the best of intentions; they are simply out of sync with the customer, who will only go to their shop once (a) she’s tired of searching, (b) needs to solve her need even if she’s unsure of what’s best for her or (c) finds going to more shops a hassle.

The important bit is the difference between our customer’s new expectations and the response – or lack thereof – that she is receiving. Our customer now knows more about the products that may satisfy her needs, but she is also more frustrated, has the feeling that she is missing out on better options, and isn’t finding answers from us; this is what we urgently need to address.

Beyond reacting to our customers we also need to engage them, to propose solutions, to be a player on equal footing, otherwise we run the risk of always playing catch up. The prizes are well known to progressive CEOs around the world, we want the long term relationship, the loyalty, the good referrals, but these need to be earned on the web by being relevant, useful, by investing in goodwill and trust. This is hard work and there is no magic formula, but it also takes us back to a more primordial meaning of marketing, in which we know our customer, we understand what she’s looking for, we are on her side, we know what’s best for her at this precise moment, at her budget, we can show her the end result of her quest and how to get there, and we can even get out of the way if needed. The future is here.