New Marketing Summit: Dancing Shoes for Honeybees - Don Peppers
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Transcript of 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
2©2008 Peppers & Rogers Group
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
Cus
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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…
4©2008 Peppers & Rogers Group
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
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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...”
6©2008 Peppers & Rogers Group
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
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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
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The Honeybee “Waggle Dance”
Source: Bienentanz, Gesellschaft fur Kommunikation, Berlin, 2002
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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
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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!
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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!
12©2008 Peppers & Rogers Group
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
13©2008 Peppers & Rogers Group
Honeybees dance about everything!
You can’t un-Google yourself.- Linda Kaplan Thaler, CEO, Kaplan Thaler Group
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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
15©2008 Peppers & Rogers Group
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
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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
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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
18©2008 Peppers & Rogers Group
The only way to succeed:
Build and maintain a reputation for
trustworthiness
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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:
20©2008 Peppers & Rogers Group
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
21©2008 Peppers & Rogers Group
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
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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
23©2008 Peppers & Rogers Group
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.
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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
25©2008 Peppers & Rogers Group
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!
26©2008 Peppers & Rogers Group
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
27©2008 Peppers & Rogers Group
The human brain is a “prediction engine”
Complex tasks are managed easily, until something violates our expectations…
“Our brain is structured for
constant forecasting.”
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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
29©2008 Peppers & Rogers Group
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
30©2008 Peppers & Rogers Group
Where were you at 11:39 am, January 28, 1986?
How did the market know?
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Diverse perspectives are the key
The most important requirement for making intelligent group decisions and predictions:
A diveRsity of perspectives
32©2008 Peppers & Rogers Group
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
33©2008 Peppers & Rogers Group
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
34©2008 Peppers & Rogers Group
Moore’s Law and Metcalfe’s Law
Gordon Moore
Bob Metcalfe
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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!
36©2008 Peppers & Rogers Group
In the words of William Gibson:
“The future is already here. It’s just not evenly distributed yet.”
37©2008 Peppers & Rogers Group
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
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1. Transacting and doing
“A mobile phone is just a credit card with an antenna…”
Richard FairbankFounder and CEO, Capital One
39©2008 Peppers & Rogers Group
1. Transacting and doing
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
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1. Transacting and doing
Commerce will drive technology further
Partnering with Thales, maker of inflight entertainment systems
Soon to offer 1-to-1 entertainment and advertising to passengers
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1. Transacting and doing
Excerpt from Jetera’s promotional film for advertisers
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1. Transacting and doing
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?
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2. Connecting and networking
Location-based services
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2. Connecting and networking
Location-based networking
Traffic reports based on actual real-time traffic
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2. Connecting and networking
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?
46©2008 Peppers & Rogers Group
3. Sensing and understanding
Technology will get better and better at enhancing our bodies
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3. Sensing and understanding
But sensory enhancements will be first
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3. Sensing and understanding
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!
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3. Sensing and understanding
“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
50©2008 Peppers & Rogers Group
3. Sensing and understanding
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?
51©2008 Peppers & Rogers Group
We are already merging with our technology
52©2008 Peppers & Rogers Group
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
53©2008 Peppers & Rogers Group
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
54©2008 Peppers & Rogers Group
And remember: People are just big honeybees!
55©2008 Peppers & Rogers Group
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