Are Free Customers Better Than Captive Ones?

Doc Searls talked about two wrong things and one right thing.

Wrong Thing #1

A random startup founder: “Sales are great! We just closed our second round of financing for 25 million dollars”

Every business has two markets:

  1. For goods and services (to your customers)
  2. For itself (to investors)

During the tech boom number 2 was more important than 1. According to Searls we are in a tech boom now. The conceit of big data today is that the system understands better what you want than you do yourself. Searls deconstructed the concept of the loyalty card which started as a concept in the early nineties:

Google NGram on Loyalty Card (1950 - now)

Google NGram on Loyalty Card (1950 - now)

His main point: they don’t work are a bad idea and are just a retail fad. Read more here

Wrong Thing #2

Avoiding customers and treating them like cattle or worse. It is now standard practice to talk about “acquiring,” “capturing,” “locking in,” “owning” and “managing” customers. On the net we use the client/server metaphor a lot (that was chosen because slave/master didn’t sound good). The cookie is the main tool for the server to keep track what is happening with the client. Searls tells us how Phil Windley writes up the history of ecommerce:

1995: Invention of the Cookie.

The End.

The one right thing

Loving your customers and letting them leave. He uses Trader Joes as a an example:

  • No gimmicks
  • No advertising
  • No loyalty cards
  • No discounts
  • Don’t do retail trade shows
  • Never say “consumer” (always say “customer”)
  • Marketing = talking to customers

Vendor Relationship Management (VRM) Movement

Project VRM started in 1996. Its goal is to provide tools that make customers independent of vendors and better able to engage with vendors. Basically to create instruments of personal intentions. With VRM the customer drives. A couple of examples:

  • Run your own personal cloud. Examples include Mydex, Azigo and Trustfabric
  • Program the way your cloud interacts on the live web. An example is kynetx.
  • Set your own terms of service. It should be possible to say things like: “don’t track me outside your site or service”, “give me my data in a usable form that I specify”, “wipe my data when I say so”, “here is my fourth party who represents me” or “here is my trust network”.
  • Get full value from your digital assets. See pde.cc.
  • Personal Request for Proposals (RFP): “I have 200 dollars and need x and y”

Summary

Free customers will always create more value than captive ones. His new book The Intention Economy will be out in May 2012 and more information will soon be available on the Customer Commons website.

Outsourcing to the Customer

Arjen Vrielink and I write a monthly series titled: Parallax. We both agree on a title for the post and on some other arbitrary restrictions to induce our creative process. For this post we agreed to write an essay of no more than 500 words discussing the title in relation to Knowledge, Innovation and Quality. You can read Arjen’s post with the same title here.

Ikea by Flickr user splorp, CC licensed. Anybody interested in co-authoring a book titled: "Ikea for Dummies, Guerilla Shopping for the Whole Family"?

Ikea by Flickr user splorp, CC licensed. Anybody interested in co-authoring a book titled: "Ikea for Dummies, Guerilla Shopping for the Whole Family"?

Outsourcing, the process of subcontracting to a third party, is mostly discussed in the context of large businesses offshoring some of their work to other countries. Reasons for outsourcing can vary, but usually have to do with saving costs, getting access to proprietary knowledge, improve quality through standardisation or help with research and innovation.

I have also seen the term used in two other contexts:

  • People now outsource part of their brain functions to technology. To use myself as an example: a lot of my memory is now outsourced to my mobile phone (much more than the phone numbers of my friends; also reminders, lists, pin codes, etc.).
  • Smart companies outsource a lot of their work to their customers, saving costs in the process. The most brilliant example is Ikea. In the old days furniture was delivered fully assembled and straight into your living room. With Ikea you drive your purchases home yourself and then spend hours putting it all together. Ikea takes this very far, letting you tap your own soft-icecreams.

“Subcontracting” to the customer has become very pervasive in the Western world. You take your own groceries from the shelf (in the past somebody got them for you) and in some supermarkets you are the one scanning them at the cash register. Full service gas stations don’t exist anymore. Money is taken out of ATMs, not at a teller and in many restaurants you have to clean up your table yourself.

There are two types of outsourcing to the customer:

  • Things that are just as fast and convenient when you do them yourself as when they are done by somebody else. The ATM is an example. This type is usually made possible by technology and will keep expanding in our society.
  • Things that are more inconvenient or take more time to do yourself, but that allow the service/product to be cheaper. Gas stations are an example of this. This is only interesting for a customer if there is an attractive balance between time lost and money saved. When time is very valuable, paying a bit extra to get service becomes interesting. That’s when you decide to get your groceries delivered for a fee or pay somebody in India to research and book that next trip abroad. As long as the costs of labour in the BRIC countries stay much lower than labour costs in the US and Europe I foresee more and more cases of individual customers offshoring what was outsourced to them.

If I had more words, I would have tried to explore what these trends might mean for the way that we teach, train and learn. I can imagine that learners soon will be asked to assemble their own curricula, find their own sources and even assess themselves. In that sense there are parallels between outsourcing to the customer and the shift from “push” towards “pull” in learning.

Maybe in a next post?

Unfortunately, I didn’t stick to the self-imposed rules in this post. But Lars von Trier didn’t do that in most of his Dogme 95 movies either (and he took a “vow of chastity” which cannot be said of me!).