new marketing summit: dancing shoes for honeybees - don peppers

1©2008 Peppers & Rogers Group

Dancing Shoes for HoneybeesCustomer Empowerment

and Personal Mobile Technology

Don Peppers

New Marketing SummitBoston

14 Oct 2008


Competing in the customer-centric dimension

Customer Needs Satisfied

Customers Reached

Maximize the value created by each customer

Maximize the value created by each product

Share of customer

Market share

Product-Centric Product-Centric Marketing Marketing

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Customers create value in two ways…

Short term: They buy products in the current period, generating sales and costs

Long term: They change their intent to buy, or their likelihood of buying, in future periods

Suppose a good customer calls you with a complaint…


The “Goldfish Principle”

Some species of tropical fish have no territorial memory

Businesses operating on the Goldfish Principle have no customer memory

To customers, a company with no customer memory may appear nonsensical, or even hostile


Succeeding against your competitors…

Why does a customer choose you instead of one of your competitors?

Two marketing professors asked thousands of business executives this question…

Answers in all industries are remarkably similar:

“...trust, confidence, strength ofcustomer relationships...”


Now consider your customer value proposition

A customer creates the most value for you when you create the most value for him

But when does this happen?

Maximizing the value customers createrequires you to earn their trust


Customers are social animals…

Bees and ants share information about new discoveries for the benefit of the group

Ants leave chemical trails, and honey bees do a complex kind of dance


The Honeybee “Waggle Dance”

Source: Bienentanz, Gesellschaft fur Kommunikation, Berlin, 2002


Now suppose you were a food source for bees…

But a bee will only do his dance to tell the other bees about you if he was satisfied with the nectar

Moral: In the absence of communication among your customers, advertising rules

Once your customers communicate with each other, it’s the customer experience that counts

Bright colors and a sweet fragrance can get any exploring bee to take a look


Our reputation precedes us electronically now…

Disappoint one customer and thousands of others will soon learn of it

Yankelovich asked consumers what they would do if a business violated their trust:

76% would tell friends and associates

12% would write about it online!


And we’ll never be less connected, always more

If Facebook were a country, its population would make it 12th largest in the world

Between Mexico and the Phillipines

In 2006, one out of every eight couples who married in the US met each other online!


Social network power

As the cost of connecting continues to plummet, consumer connections blossom

And consumers increasingly influence other consumers

Customer review sites spring up everywhere

Tripadvisor.com, Angies List, epinions

Ratemyprofessor.com (universities and instructors)

Vault.com (employers)

Healthcarecommision.org.uk, healthgrades.com


Honeybees dance about everything!

You can’t un-Google yourself.- Linda Kaplan Thaler, CEO, Kaplan Thaler Group


Customers assert their new social power easily

August 2007 – HSBC forced to reverse courseAugust 2007 – HSBC forced to reverse course

Over the summer it had dropped its policy of free Over the summer it had dropped its policy of free overdrafts for university studentsoverdrafts for university students

By using Facebook, students connected with By using Facebook, students connected with others to organize a protest of this new policy others to organize a protest of this new policy

Soon HSBC reinstated the free overdraft policySoon HSBC reinstated the free overdraft policy


The rule of “preferential attachment” Networks of customers evolve over time…

A social network starts with two people knowing each other, then a third is added, and so forth

Each new friend is added to the network by his or her connection to an existing member

Preferential attachment:

While each new attachment is random…

…each new member is more likely to connect with someone who already has more connections

Preferential attachment means networks form in a path dependent way


Networks grow in an evolutionary fashion

Adaptation and “fitness” are key determinants of the influence or wealth of various participants

A “fitness landscape” is filled with local optima that attract individual participants


Path dependence leads to unpredictability

In 2007 the Wall Street Journal examined 25,000 user posts on six “sharing and collaboration” Web sites

13% of Netscape’s “most popular” postings were done by a single user

900,000 registered users on Digg, but one third of home-page postings come from just 30 users

Reddit’s most widely read user, Adam Fuhrer, has millions of page views, including MS Vista reviews

Adam Fuhrer is just 12 years old, and attends an elementary school in Toronto


The only way to succeed:

Build and maintain a reputation for

trustworthiness


The need for more trust has boosted business

Lack of trust slows transactions down and imposes frictional costs

When more trust is required, business thrives, as obstacles are reduced

Case in point:


A study of one financial firm’s 6700 customers separated referral value (“CRV”) out of LTV

68% of these customers expressed their intention to refer the company to other people, but

Only 33% followed through

14% generated new business for the firm,

And just 8% actually became profitable customers

Also, highest spending customers are not always the most valuable in terms of referring others

Analyzing a customer’s referral value

Source: “How Valuable is Word of Mouth?” Harvard Business Review, October 2007


At one telecom company

CLV vs. CRV - Telecom Company

$-

$500

$1,000

$1,500

$2,000

$2,500

1 2 3 4 5 6 7 8 9 10

Customer Decile

Valu

e CLV

CRV

Source: “How Valuable is Word of Mouth?” Harvard Business Review, October 2007


DoubleClick identified network “influencers”

Quantitative survey of 6000 Web users found 1000 influencers with certain traits

“People often ask my advice about…”

“I am an expert in certain areas…”

Influencers

Use the Web more than twice as much

Pay more attention to online ads, and want more relevant messages

But also more likely to clear their cookies regularly, as well as fast forwarding through video commercials


Influential people within social networks

Influencers and connectors are curious and inquisitive people.

They want to know but they don’t want to be sold to.


In 2005, one influential blogger wrote about his bad service experience with Dell Computer This “Dell Hell” story cascaded online as more people

commented about their own bad experiences

Then Businessweek and The New York Times picked it up

Dell’s reputation suffered terribly, and its financial results declined, as well

One year later, a UK consulting firm analyzed the incident and concluded it was not really Dell’s fault at all Most of the controversy was generated by errors and

misinformation, passed along by a few key influencers

And sometimes influencers are just wrong!

Source: Paul Gillin, The New Influencers, 2007


So be careful when you try to generate “WOM”

A cautionary tale: Staples’ word-of-mouth marketing campaign, called Speak Easy

Despite its careful architecture, the press portrayed it as sneaky and manipulative

You can’t manufacture “authentic” word of mouth

If it isn’t spontaneous, then it isn’t authentic!


WOM is inherently unpredictable

JupiterResearch: Only 15% of viral marketing efforts actually

generate positive word-of-mouth!

No matter how delicious your nectar is… …you can’t always control what the honeybees

will dance about


The human brain is a “prediction engine”

Complex tasks are managed easily, until something violates our expectations…

“Our brain is structured for

constant forecasting.”


Groups can be intelligent prediction engines, too

Groups of people make collective decisions much better than even expert individuals do

As long as a group includes a diverse set of people making independent decisions

It isn’t the number of experts in the group, but the diversity of perspectives that counts

“Decision markets” predict sporting events and election results with great accuracy

The market for orange futures predicts Florida weather more accurately than meteorologists do


Where were you at 11:39 am, January 28, 1986?

Four key space shuttle contractors Four key space shuttle contractors Rockwell built the Challenger and its engines Rockwell built the Challenger and its engines

Lockheed managed ground supportLockheed managed ground support

Martin Marietta manufactured the external fuel tankMartin Marietta manufactured the external fuel tank

Morton Thiokol built the solid fuel boostersMorton Thiokol built the solid fuel boosters

““No clues” on the day of the event, and the actual No clues” on the day of the event, and the actual investigation required six months to completeinvestigation required six months to complete

But by 11:50 am, Thiokol’s stock was down the most But by 11:50 am, Thiokol’s stock was down the most and remained lowest throughout the investigationand remained lowest throughout the investigation


Where were you at 11:39 am, January 28, 1986?

How did the market know?


Diverse perspectives are the key

The most important requirement for making intelligent group decisions and predictions:

A diveRsity of perspectives


Businesses can harness “decision markets”

Rite-Solutions (software for military applications) began internal stock market for product ideas in January 2005

55 stocks listed on “Mutual Fun,” each with detailed description, and each trading at $10 per share initially

Employees bet up to $10,000 in “opinion money,” and also lend support by volunteering to work on project

Winners share in proceeds of new products if successful

Biggest win so far is a type of 3-D visualization software initially rejected by “experts” in R&D department

One year later, VIEW accounts for 30% of sales!

Source: “Under New Management,” New York Times, 26 March 2006


Decision markets are now widely employed

Best Buy uses its own decision market, called “TagTrade,” to predict: Which products will sell best in which stores Whether sales forecasts are accurate, and whether

marketing programs will be successful

Google uses decision markets to predict: Demand for Gmail subscriptions Product launch timetables

GE, Microsoft, Intel, other companies are all experimenting with decision markets

Source: Wall Street Journal, Sept 16, 2008


Moore’s Law and Metcalfe’s Law

Gordon Moore

Bob Metcalfe


Networking and computation: Implications

100 million+ Google searches every day How were these questions answered before Google?

Last year 3000 new books were published… …every day!

In 2008, more new and unique information will be generated than in the previous 5,000 years

The amount of new technical information is roughly doubling every two years By 2015, it will be doubling every 72 hours!


In the words of William Gibson:

“The future is already here. It’s just not evenly distributed yet.”


What we can expect in a PMT-enabled future:

Personal mobile technology will dramatically change our lives in three general areas:

1. Transacting and doing

2. Connecting and networking

3. Sensing and understanding



“A mobile phone is just a credit card with an antenna…”

Richard FairbankFounder and CEO, Capital One



Commercial transactions can pay the costs of connectivity and technology

Free SIM card, just apply You must be 16 to 24 43 free minutes a month 216 free texts a month Earn more by clicking ads or

buying productsHow Blyk uses its customers’

social networks



Commerce will drive technology further

Partnering with Thales, maker of inflight entertainment systems

Soon to offer 1-to-1 entertainment and advertising to passengers



Excerpt from Jetera’s promotional film for advertisers



Portable multimedia players Mobile gaming Automotive infotainment

Entertainment, fun, amusement, games

Real-time reality shows

“Concerts” with PMT devices sounding like different instruments or voices

Sports events viewed from others’ seats

Coming soon?



Location-based services



Location-based networking

Traffic reports based on actual real-time traffic



Location-based presence When you access Facebook or Twitter, don’t you want

to know who else is “present”?

PMT allows “presence” and “location” to be combined

Real-time traffic and weather reports, with local comments and details from other users

Go to the mall, the game, or the concert, and detect which friends are there with you, locally

Coming soon with PMT?



Technology will get better and better at enhancing our bodies



But sensory enhancements will be first



Collective power of sensory inputs What would “the news” be today without on-the-

scene people videoing crimes and disasters?

Now imagine millions of mobile, networked cameras uploading their images, 24/7

How “real” will real-time news actually be?

And soon you’ll be sorting through these images with software that recognizes locations and faces!



“Cloud sensing” using collective inputs

Earthquakes can be detected using a few thousand individual laptops

Jesse LawrenceAsst Prof of Deep Earth Seismology

Stanford

Source: Economist, Sept 25, 2008



Network-enhanced understanding Sensory inputs drive our brains – our “prediction engines”

As a network with linked senses, the collective human race is destined to become more intelligent on its own

Voice-analysis lie detectors and emotion sensors

Molecular “sniffers” and pheromone detectors

Sensors operate both locally and remotely, by proxy

Ad hoc “smart networks” of connected users anticipating events, collectively

Coming soon with PMT?


We are already merging with our technology


Give your honeybees dancing shoes

Improve your “architecture of participation”

Make it easy, interesting, and rewarding for customers

3M relies on “lead user” customers to experiment with home-made improvements and upgrades

National Semiconductor provides an online platform for customers to design their own product improvements

Customers generate 20,000 new ideas each month!

Innocentive signed up 30 blue-chip firms and more than 90,000 independent professionals, from 175 countries

Source: “Under New Management,” New York Times, 26 March 2006


Help your honeybees dance with PMT

Have fun, and let your bees have fun!

People like to connect with other people – your corporate mission should help them do this!

Provide useful, location-based information

Let customers sign up “buddy lists” for checking their friends’ presence at your location

Facilitate networked, moderated reviews of products and services, including your own


And remember: People are just big honeybees!


Peppers & Rogers Group

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