How Much Can You Ask of Your Customers?
Think of IKEA and eBay. Some popular companies make it easy for customers to become "volunteers" in the organization's success, says HBS professor Jim Heskett. Is there a downside? Or will customer-fueled strategies provide competitive advantage in the future? Online forum now closed.
Is customer volunteerism combined with "ownership" a double-edged sword? It's seems okay to involve customers in providing ideas for new products and processes. Encourage them to refer new business. But beware the downside of poorly thought-out strategies to encourage customer volunteerism and "ownership." Those were messages in the very thoughtful responses to this month's column.
Dianne Jacobs commented, "This builds on the real social need for people to connect in sync with a purpose." Charlie Cullinane added, "I believe we can ask a lot of our customers if we give something back, even if that something is a sense of belonging … just look at this forum … to see it in action." As Jacoline Loewen put it, "Even if a company does not want customers involved in their business design and delivery, it will happen." Commenting on the need to bring trouble-shooting forums in house, Ruediger Voelske said, "Innovations and strategies can then be developed from forum experience."
Others offered examples of interesting applications of the idea of involving customers in fashioning products and services. These included the National Geographic Genographic project (Inga Ness), Trendwatcher (Gerald Nanninga), and Wikipedia (Adnan Younis Lodhi and Sameer Kamat).
In spite of the advantages of putting customers to work, a number of cautions were raised as well. Bruce Dancil warned, "Some of the ugliest cases of over-involvement (of) customers have led to bitter intellectual property right disputes … customers simultaneously trying to drive the product in two (or more) very separate market directions … (or) feature creep that literally prevents on-time, on-budget delivery." Heinjith Balakrishnan commented, "… the biggest challenges for … organizations are to have the necessary competencies and resources to act upon … inputs." Sowmia Gopinathan echoed this comment: " … (the) downside is only where expectations of the customers are made high by involvement and … (are) not met due to resource constraints." M. J. Fleming cautioned, "If you (as a customer) have influence, you can lead in a horrible direction … We should all be very careful of what we wish."
To avoid these predicaments, Neil Jackson recommended, "Before we encourage too much, the risk surrounding what it is we are encouraging, how and when we set overall rules for encouraging (volunteerism) and how we plan to assess, monitor, and manage need to (be) addressed." Alden Cushman added: "how information is collected, put into context, prioritized, and impacts business decisions is key."
Other comments raised questions for us to think about. As Jill Malleck said, "Many (customers) … do not want to be artificially attached to a company … Organizations would do well to pay more attention to their employees." Mark Bright asked, "Can we have too much "customer" in the process?" And Gerald Nanninga posed the interesting question: "Have we limited our potential by not only mislabeling potential partners as 'customers' but in mislabeling everyone in the entire supply chain?" What do you think?
The Internet and related technology has freed customers to express their feelings, exchange information, and act in ways that previously were unheard of. Several recent writings suggest that the next phase in the activation of customers will be putting them to work in the service of an organization. Characteristic of this thinking is an article in the October issue of the Harvard Business Review by Scott Cook, Co-Founder and Chair of the Executive Committee of Intuit.
Cook argues that a number of successful organizations have gotten that way by making it easy for "volunteers" to contribute to their success. Business models are designed so that volunteers (often customers, but also others) can easily contribute content (opinions and ratings for Zagat guides), "stuff for sale" (eBay online marketplace), behavioral data (Google's search engine algorithm), and even resources (Skype's Internet-based phone system). What is contributed benefits other users (as, for example, when a network is enlarged) as well the organization itself (providing lower costs, greater resources at little cost, better customer service, more effective marketing, increased employee engagement, and better design).
Research reported in a book, The Ownership Quotient, that three of us recently co-authored suggests that the benefits of customer contributions are significant. Further, an organization's best customers—measured in terms such as size, loyalty, or lifetime value—often are the most willing to go to work for it, whether that means referrals of new customers, ideas for new products or processes, or even help in the selection of its frontline employees. Of greater significance than satisfaction or even the willingness to recommend the organization to others, these "ownership" behaviors can make some customers more than a hundred times more valuable than others.
Just how far can ownership be taken? What's its downside? Those are questions explored by Pete Blackshaw, the incoming Chair of the Better Business Bureau, in his new book, Satisfied Customers Tell Three Friends, Angry Customers Tell 3,000. The title is a play on the standard pre-Internet belief, based on the results of only one research study that became a mantra, that satisfied customers tell five others but dissatisfied customers tell ten. Blackshaw's experience with consumer-generated media suggests that consumers today can be a major force in making or breaking a product or service. But they have to be given the latitude and freedom to do so, involving a risk that few organizations are willing to take.
Note that the term "marketing" has not appeared thus far. Our work suggests that customer and employee "ownership" has as much relevance for operations and human resources as it does for marketing. Blackshaw argues that organizations that regard their web sites as marketing devices run the risk of destroying the credibility of information presented there, thereby losing their effectiveness with potential "volunteers" and "owners." It requires that marketers, as Blackshaw puts it, work in an "atmosphere of complete honesty," something sometimes difficult for them to do.
These phenomena raise interesting questions. Just how much risk do organizations with well-established names, policies, and processes take in encouraging volunteerism and ownership on the part of customers? How can the risk be mitigated? Are customers being underutilized by the typical enterprise? Going forward, will customer-fueled strategies provide significant competitive advantage? How much can you ask of your customers? What do you think?
To read more:
Pete Blackshaw, Satisfied Customers Tell Three Friends, Angry Customers Tell 3,000: Running a Business in Today's Consumer-Driven World (New York: Doubleday, 2008).
Scott Cook, "The Contribution Revolution: Letting Volunteers Build Your Business," Harvard Business Review, October 2008, pp. 60-69.
James L. Heskett, W. Earl Sasser, Jr., and Joe Wheeler, The Ownership Quotient: Putting the Service Profit Chain to Work for Unbeatable Competitive Advantage (Boston: Harvard Business Press, 2008).