Once again....an excerpt. Yup. In keeping with the new tradition of love, peace and.....oh wait, that was my tradition in the 60s. I'll start over. In keeping with the new tradition of love, money and alcohol....oh wait, that was someone else's tradition in the 80s. One more time. In keeping with the new tradition of love, community, sharing and transparency, once again, an excerpt from CRM at the Speed of Light 4th edition. This time Chapter 1.
This is a good time to let me know if this is off the mark, wonderful, needs some tweaking etc. for both style and suggested content. (After all, this is ONLY an excerpt). I stil have time to fix things in the book, though not much more. I'm planning on publishing as many excerpts as I can before I run out of writing time for the book so....
Once again, we begin with a Wordle for the entirety of Chapter 1 (with only 100 words tagged).
This excerpt is a quick look at the business ecosystem back in the day it was centered on the enterprise, not the customer. You didn't really think that I'd give you the really incredible stuff here did you? Who'd buy the book if I did that?
What's A Customer Ecosystem?
Wikipedia defines an ecosystem as
"The interactive system established between a group of living creatures and the environment in which they live. The centerpiece of this definition is the idea that living organisms are continually engaged in a set of relationships with every other element constituting the Environment in which they exist."
A customer ecosystem is simply the totality of interactions centered around customers that takes place over time. The customer sits at the hub, rather than just being a spoke in the corporate wheel. The relationship changes from one where the customer is the object of a sale to one in which the customer is the subject of an experience that he or she controls with businesses. How'd that happen? I'm so glad you asked. Gather 'round the campfire.
Once upon a time in a land not so far away…..
The Product-Focused Corporate Ecosystem
If you tool back to the 1950s and 1960s, it was a different world. Madison Avenue advertising agencies created markets and market demand, manufacturing ruled the universe and the way information was captured was, shall we say, primitive.
Typically, you would read a magazine or watch TV in black and white and see something of interest to you. If you were reading Life Magazine, for example, you would find the ad, clip out the coupon that was in the magazine, characterized by a cute little pair of scissors, fill it out, put it in an addressed envelope with a 3 cents stamp and send it off to the producer of the "item of interest." Then you waited two weeks or more to get a brochure from the manufacturer, read it, decided based on the manufacturer's information whether or not you wanted it, went to a store that sold it, listened to a salesperson's pitch on it - maybe or maybe not you had the benefit of a neighbor who owned it - bought it (or not) and hoped for the best. You had NO control over the information and no access to knowledge of the product beyond that given to you by the manufacturer.
According to a Business Week article in 2004, during the 60s, an advertiser could reach 80% of U.S. women with a single ad aired simultaneously on CBS, NBC, and ABC - which of course represented the only three channels - and the only TV networks that existed . To reach that same 80% in 2008 it would take at least a parallel airing on a minimum of 100 channels and that's only if that many women were watching TV at sometime.
Additionally during this era and throughout the 1980s, newspapers were the only real source of other media that were mass consumed so a well placed ad in a local or national publication would reach to the specific groups that were being targeted by the of selling standardized products to a mass market.
But, as we shall see in a moment, we now have the Internet and a major decline in the number of print media readers as more and more get their content pushed to them via the Internet or at least will scroll to CNN or ESPN or even the New York Times online before they touch a TV set or newspaper.
But back then, that wasn't the case, folks.
Because the products were standardized, and aimed at broad consumption - not at all focused on individuals, the product manufacturer was in control of supply. The retailers owned the market. And they all owned the knowledge flow in conjunction with the advertising agencies that manufactured that information. Because the post-World War II period - at least in the U.S. - generated wealth unheard of until then, the demand outstripped the supply - making the producers and retailers happy.
These consumable products were mostly generic - for one reason - customers were perfectly willing to buy them. The expectations of the customers were low. As described in a CBS Marketwatch article in June 2008,
"Customers 1.0 were dutiful consumers of mainstream messaging and one-size-fits-all goods. They would gladly drive miles out of their way to visit retail outlets, they readily leaned heavily on advice from retail clerks in making their selections, and they happily bought goods from among arrays of pretty generic offerings. They put up with long lines and poor service, because retailers had the power and their customers were just grateful to get the goods."
The corporate ecosystem was in the hands of those who manufactured products and they dictated the terms to customers with low expectations.
CRM as a science didn't exist. It seemed to be there in the often abused and not really believed term "the customer is king." But with the limited tools the customers had and the limited availability of information, if the customer was king, the manufacturer was a god.
The Customer-Focused Corporate Ecosystem
But from the late 1980s and on through early part of the millennium, technology that could increasingly deliver more customized goods at lower prices more quickly in combination with the vast increase in the availability of information that wasn't from the manufacturers themselves. The low cost availability of courier services like Federal Express (FedEx) or United Parcel Service (UPS) meant that they were able to deliver products at reasonable cost with lightning speed for roughly the same price regardless of the size of the retailer to anyone.The size of an enterprise or its ability to shave cents off of a price was no longer the game changer it once was. As a result retailing moved to category-killer or niche products that customers wanted and were willing to spend money at Costco or Sam's Club where high volume purchases brought significant price discounts. If you shopped in the middle, you could shop online. In fact, as the millennium hit, the ability to get those ultra-niche products at sites like eLuxury.com took away the margin of advantage, leaving only the caché of the shopping experience in the Prada store in Manhattan, not the product availability. But as we will see throughout this book, great experiences trump the availability and price of goods, more often than not.
There were wrinkles to the lower end of the equation too. Stores like Walmart.com gave even greater discounts online and sites like Overstock.com were able to make high volume purchases and then sell single items to consumers at a high volume price giving them a margin of advantage over Costco and BJ's Warehouse where the high volume purchase was required. Game, but not set or match to Overstock.com
That's because the set and soon the entire match was being won by the customers and on a new court.
That court was the Internet.
The power of the Internet for both customers and businesses became apparent in the mid 1990s when both ecommerce and online review sites began to become increasingly popular ways to do business and communicate. It made information easily available directly from the manufacturer or retailer via their websites and it gave, for the first time, an independent voice to the users of the products and services being bought - often far more knowledgeable than the actual producers; mostly because the producers didn't use them.
Retailers began to the see the value of this too. They started allowing customers to order online and pick up in stores or get the products shipped. With the 1995 growth of Amazon.com, came the BarnesandNoble.com experience soon after. The difference, aside from the Amazon shopping experience appearing considerably more personal and entirely more engaging, was that bricks and mortar bookseller Barnes and Noble moved to allow customers to order books online too.
Over time, the digital and physical business worlds began to intertwine. Retailers let you order online and pickup in stores (Best Buy), travelers could get their tickets online and then print out their boarding passes from their PCs (United); you could buy your clothing online and return it to a bricks and mortar store anywhere (Nordstrom's). But it didn't stop with that. This signaled a shift to the customer's unique capabilities to command how he or she purchases. Along with the leveling of the playing field by the courier services, increasing Internet use, better web security protocols and the evolution of Google search also translated to the customer being able to more safely find other providers of the products and services that they wanted anywhere around the world with equal alacrity. They didn't have to be limited to their neighborhood stores any longer. All avenues were opening up for ecommerce. As they said in NY in the 1930s "the world was their (customers') erster." That would be "oyster" for those of you unacquainted with Brooklyn's regional dialect transliteration.
Obviously, given the choices that customers now had, businesses at every level, consumer or with other businesses, had to widen the choices that customers were being given. Products and services were no longer the differentiators that they had been. Price and availability were no longer the way to a customer's wallet share.
Experiences became the thing.
This wasn't a big surprise to some. In 1998, Joe Pine II, who you'll meet next chapter, and his business partner at Strategic Horizons, LLC, James Gilmore, wrote a groundbreaking book called "The Experience Economy" that discussed not just the desire of customers to have an experience with the company but the approaches that a company could take to commoditize that experience in ways that the customer would be willing to pay for. As we'll see, no customer is concerned about paying premiums for things.They just have to want them enough to make the purchase. The most famous example of that is, of course, Starbucks. Five bucks for a cup of coffee that costs about 45 cents to produce including overhead. Hmmmm. That would be more than 1000% margin. What for? Not just the coffee but the Starbucks experience. You know what it is - or at least - was. You felt cool going to Starbucks and working on your laptop with then free - no longer - wireless connectivity sitting on a couch gabbing with your friends. You weren't drinking coffee; you were sipping something with a ridiculous name - "Vente Mocha Cappucino Skim Latte." Weird, maybe but oh so trendy. Guilty pleasure. Five bucks.
This was a significant transition point in treating customers. because as we will see the business model began to shift for how customers interacted with companies.
CRM grew up in this era. The idea of how you were going to manage your customers in ways that retained them, or in more lucrative periods, acquire them became of paramount importance as the playing field in the competition for customers became more level. CRM 1.0 promised efficiencies in your operations - especially with customer facing activities like marketing, sales and customer service - that would free up your representatives to spend more time with customers doing what they did - selling to them, solving customer service problems. Sales force automation (SFA) was the lead application and sales effectiveness the primary strategy. For the simple purposes of this section, the questions that CRM was supposed to answer during this time were:
- How do you manage the relationships you have with the customers in such a way that you can increase your revenue opportunities with them?
AND
- How did you capture and aggregate enough customer data to give you a well rounded record of customer information to help you make better decisions on how your customers would respond to you? This was the Holy Grail of CRM at the time. The consistent 360 degree view of the customer available to who needed it, when they needed it
Things didn't stop here. More consumers were becoming aware that they actually were empowered in ways that had been previously unavailable to them - largely thanks to their ability to communicate via the Internet with complete strangers. It was apparent that the users of the products not only knew more about the products than the manufacturers who made them or the retailers who sold them, but they could communicate that knowledge to others easily, at their leisure. The result was the Cro-Magnon version of user generated content (UGC) - the review site.
Do not underestimate the power of this. We'll take a look at their power in later chapters. Just trust me here. Study after study shows that people trust their peers or supposed peers more than any of the corporate declarations of quality and value that are issued about products. Their decision-making process (See chapter 16) is complex and never a matter of just good review v. bad review.
But this was just the harbinger of something much more important and deeply affecting.
Paul, I think your excerpt is on target. I would use a different source for the definition of ecosystem. Let's just say there is a certain segment of your customers who might find a main stream dictionary definition more credible. Those people who believe that Wikipedia isn't always credible may tune out that entire section.
Posted by: Glenn | July 15, 2008 at 09:04 AM