Just like we learned in preschool…

…sharing is good.  Yes, it’s as simple as that, and it applies to more than just divvying up the Crayolas or the action figures.  In chapters 5 through 8 of Don Tapscott and Anthony Williams’ Wikinomics, the authors stress the importance of companies embracing their customers as co-innovators.  Of course, when it comes to sharing the “secret sauce”, many corporations have a hard time understanding how they can do this and remain profitable.  It’s definitely a valid concern, and I don’t think we have all the answers to this yet…but many of the examples cited in Wikinomics show that we’re at least heading in the right direction. 

Tapscott and Williams introduce a new term for these customers turned innovators: the prosumers.  “Prosumption,” they write, “is becoming one of the most powerful engines of change and innovation that the business world has ever seen.  Cocreating with customers is like tapping the most uniquely qualified pool of intellectual capital ever assembled, a reservoir of talent that is as keenly and uniquely enthusiastic about creating a great product or service as you are.”

Amazon is a great example of a company that’s embraced its prosumers.  Those who participate on Amazon.com have the opportunity to earn referral fees from products they imbed on their Web site or news feed, rate the products they buy, and so on.  Jeff Barr of Amazon’s Web services says that Amazon wouldn’t be able to make such great innovative strides if they didn’t open up their tools and data to the public: 

“The more data that we’re able to put in the hands of developers, the more interesting tools, sites, applications will be built, and the more of those that exist, the greater the return to Amazon.  We’re going to see more traffic, more clicks, and ultimately we’ll see more purchases.”

Another great example of a company that loves its prosumers is Threadless, a Chicago-based t-shirt company.  Their design team?  Anyone on the Web.  Users submit their designs to Threadless, and then the community votes on the ones they’d like to see printed on shirts.  The designs with the most votes win, and the creators of those designs are paid anywhere from $500-2,000.  Apparently the business model is working, because Jake Nickell and Jacob DeHart, creators of Threadless, pull in an annual revenue of about $15 million.

All companies who want to be successful in the future need to embrace their customers as co-creators.  It’s certainly easier said than it is done, and coming up with a way to allow collaboration while still making a profit is definitely challenging.  But in order to remain relevant in a Web 2.0 world, this is a must for corporations everywhere.

Marketing and the freedom of choice

The article from the Kellogg School of Management about marketing ethics could not have been timelier. Just last week in my media relations class, we watched a video about Rick Berman, a Washington, D.C.-based lobbyist whose practices and client roster may seem, well, unethical.

According to the CBS News article, Berman is “against Mothers Against Drunk Driving, animal rights activists, food watchdog groups and unions of every kind.” He also “blasts MADD for no longer being run by mothers, and PETA, who he accused of killing animals in its care. And he questions the danger of mercury in tuna.”

The causes that Berman promotes brings us to the questions that Philip Kotler, author of the marketing ethics article, asks about marketers and their duties in serving the public interest. What happens when a customer wants something that is not good for him/her or something that is bad for other groups in society? Do marketers have a responsibility to not promote a product that is potentially harmful?

If the answer to both of Kotler’s questions is “yes”, then you could argue that Berman is one of the most unethical marketers around. But here’s the thing: Berman isn’t fabricating information. He’s presenting facts. They might not be the facts that the food watchdog groups or the animal rights activists want to hear, but who is to say that only products considered to be “good” by society deserve marketing strategies?

America is a democratic society and, for the most part, we are allowed to do as we please. The same goes for our lifestyle choices: ultimately, the consumer will decide whether or not he or she thinks eating tuna fish is safe. My point is that marketers can present both sides of an argument but, when all is said and done, it is the consumer who weighs the information and makes the choice to purchase or not purchase a product.

Although both sides should be able to tell their story, companies who sell potentially harmful products do have some social responsibility to, as Kotler put it, reduce the side effects of their products. And most corporations do. Beer manufacturers provide warnings about drinking responsibly. Fast food restaurants offer healthier alternatives to the cheeseburger and fries combo, and some (like Wendy’s) even post the nutritional information for each product on the wall next to the counter.

I think “marketing ethics” are more about being honest and transparent than only promoting products that are in the public interest. Every company has a right to present information about their product as long as the information is truthful and accurate. No corporation or marketer is forcing a consumer to buy their product. Good marketing is certainly important but, in the end, it’s really all about consumer choice.

Happy Employees + Good Business Practices = High NPS

When I started reading Fred Reichheld’s book, “The Ultimate Question: Driving Good Profits and True Growth”, I more or less agreed with his theories.  His NPS formula makes sense (although realistically I think it would be very difficult to calculate): promoters minus detractors equal a company’s Net Promoter Score, or NPS.

Then I read the second half of the book and wasn’t so pleased.  It really bothered me that Reichheld spent several chapters telling companies that they needed to create things like the customer grid on page 120 to develop a plan to increase their NPS.  To me, an NPS is not about charts or complicated mathematic formulas.  It’s actually pretty simple: happy employees plus good business practices equals a high Net Promoter Score.

The corporation’s focus should be on its employees and customers, and the end result of satisfying them is an increase in the company’s NPS.  I disagree with Reichheld’s statement: “When a company focuses on improving its NPS, by contrast, its employees are happier.”  Although this is somewhat a case of, “What came first, the chicken or the egg?” I really think that this process has to begin with the customers and employees.  The ultimate goal of the NPS is to increase a company’s profits and, although this might be idealistic, a company should try to set aside its financial goals for just a moment and truly concentrate how it should treat the people who support the corporation every day.

The Irish supermarket chain Superquinn is a great example of how an NPS can increase as a result of focusing on making sure employees and customers are content.  Reichheld told the story of the chain owner, Feargal Quinn, hiring a new manager.  This manager saw that the stores were throwing out thousands of pounds of freshly baked bread each day, and he felt that the stores should keep it and sell it again the following day.  Even though the supermarket had a policy of selling fresh baked bread daily, the manager insisted that the stores make this change.  They did, and bakery sales dramatically decreased.

“The customer experience should never be sacrificed for profits,” Reichheld wrote.  And this is so true.  A very recent example of this lesson is apparent in Jane’s blog post from last week.  She tells the story better than I do – so you should read it – but the main point is that companies cultivate more promoters when they do genuinely nice things for customers instead of just focusing on the bottom line.  And when corporations treat their customers (and employees) with the utmost respect, their profits magically increase.  Funny how that happens, isn’t it?

And the Ultimate Question is….

When I first saw this book listed on our class syllabus, I was intrigued. The ultimate question? What exactly is the Ultimate Question? I found my answer on page 28:

“How likely is it that you would recommend company X to a friend or colleague?”

In Fred Reichheld’s book, “The Ultimate Question: Driving Good Profits and True Growth”, he argues that company’s profits are both good (coming from a satisfied customer) and bad (coming from an unsatisfied customer). Part of figuring out what portion of your profits are “good” (and knowing how to grow your profits in the future) is understanding who’s promoting you versus who is unhappy with your service or product. Reichheld even has a formula that will help companies calculate what he calls their Net Promoter Score, or NPS. A company’s NPS is essentially equal to its promoters minus its detractors (the unhappy customers)….and this score influences a company’s profits and growth.

Reichheld argues that “companies need to understand the economic value that results from building better relationships.” Yes, even one customer’s perception of a company can potentially affect its bottom line.  Actually, as my classmate Luke pointed out, Reichheld actually says that one negative comment about a company can neutralize between three and 10 positive comments. And this is where the Ultimate Question comes in: studies have shown that potential customers trust their peers more than they do advertisements or newspaper articles. According to the 2007 edition of the Edelman Trust Barometer (full disclosure: I work at Edelman), people are heavily influenced by their friends, family, coworkers, and other who they consider to be similar to themselves. “For the second consecutive year, “a person like me” or a peer is the most trusted spokesperson in the United States at 51%.”

Because people are so heavily influenced by what their friends and family are saying, corporations have to develop and maintain good relationships with their customers. But Reichheld points out that many companies are so huge that it’s becoming increasingly difficult (and often costly) to obtain feedback from a substantial number of customers. So how can companies effectively solicit responses from those who have bought their product or service?

Companies can come right here…to the Internet. With numerous types of social media available, the Internet allows companies to listen to what customers are saying about them and to build relationships with these customers. For example, a corporate blog can serve as a pseudo focus group but also allows companies the opportunity to respond to those commenting on the blog. This two-way communication is key to building relationships, and the Internet provides many effective, inexpensive outlets on which to do this. Granted, not all customers spend time online or feel inclined to comment on a blog, but creating corporate blogs or forums is certainly one good approach that a company can (and should) take when reaching out to customers.

Of course, the idea of obtaining feedback online isn’t new. Listservs, online forums, and e-mail groups (like the one created by the Consumer Tax Group, as mentioned in Reichheld’s book) were among some of the original online methods used to garner comments from customers. But the current technology and social media landscape are continually making this process much easier.