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The connected customer

In September of 2011, Bank of America announced it would start charging customers $5 per month to shop with their debit cards. In early October a 27-year-old gallery owner in Los Angeles named Kristen Christian set up a Facebook event page, inviting 500 of her Facebook friends to move their accounts to local credit unions by November 5, which she called “Bank Transfer Day.”

The ATM revolt

“Together we can ensure that these banking institutions will always remember the 5th of November,” she wrote. “If we shift our funds from the for-profit banking institutions in favor of not-for-profit credit unions before this date, we will send a clear message that conscious consumers won’t support companies with unethical business practices.”

Christian’s groundswell movement quickly snowballed. Within three days 8,000 people had signed up to attend the event.

“I was tired” wrote Christian in another post. “Tired of the fee increases, tired of not being able to access my money when I need to, tired of them using what little money I have to oppress my brothers & sisters. So I stood up. I’ve been shocked at how many people have stood up alongside me. With each person who RSVPs to this event, my heart swells. Me closing my account all on my lonesome wouldn’t have made a difference to these fat cats. But each of YOU standing up with me… they can’t drown out the noise we’ll make.”

By November 4, the day before Bank transfer Day, at least 650,000 people had added $4.5 billion to credit union savings accounts. That same week, Bank of America dropped its plan to charge additional fees.

A power shift.

Customers are becoming aware that they have the power to collectively organize and protest, and today they have the tools to do it. Revolutions never start at the top. They start with the people, when they begin to recognize the power that comes from numbers.

A single customer is as powerless as a drop of water. But put enough drops together and you’ve got a force on your hands that will never be contained or controlled. Revolutions like Christian’s ATM revolt begin the same way: one molecule bonds to another, and they connect. With every new connection the mass and momentum of the whole increases.

Information technology and revolution.

This isn’t the first time in history that new information technologies have sparked revolution. It’s a recurring pattern.

Before the printing press, books were hand-written manuscripts available only to the clergy and the wealthy. The mostly-illiterate public relied on those in power to interpret humankind’s body of knowledge. Any communication between ordinary people relied on word of mouth and was mostly limited to short distances. In short, information was distributed in pockets and silos.

Information technology and revolution

The printing press gave people a way to share information in a peer-to-peer way, bypassing traditional power structures. The rapid information sharing that followed, via books, pamphlets, newspapers and scientific journals, effectively ended the Middle Ages and sparked the Age of Enlightenment, the Industrial Revolution, and ultimately the political revolutions that resulted in the first constitutional democracies.

Today the web is having a similarly profound effect, allowing people to bypass traditional media channels and power structures to communicate with each other directly. Once again, information and ideas which were contained in pockets and silos are spreading far and wide. Once again, innovation is accelerating. Once again, mass peer-to-peer communication is enabling and empowering social, intellectual and political revolutions.

Peer-to-peer information technologies like the printing press and the web unleash powerful revolutionary forces. But revolutions begin in the streets. They often go unnoticed or ridiculed in their early stages. It took 100 years of bible-printing before Martin Luther nailed his 95 theses to a church door in Wittenburg. It was another hundred years before the first scientific journals were printed, and another hundred before the American Revolution broke out in 1775. It took more than ten years for colonial dissent to simmer before the American Revolution broke out into open war.

But today events unfold at a more accelerated pace. It’s happening faster this time.

95 theses.

In case you didn’t notice it, another 95 theses were nailed to the wall of the web in 1999, when Rick Levine, Christopher Locke, Doc Searls and David Weinberger wrote the Cluetrain Manifesto.

In the same way that Luther’s 95 theses directly challenged the most powerful institution of his day, the Cluetrain Manifesto directly challenges today’s most powerful institutions, and its messages seem more prescient than ever. I’ve pulled a few of the statements from the Cluetrain Manifesto, along with an observation or two for each.

Markets are getting smarter… faster than most companies.

Clearly social networks such as Twitter and Facebook, which didn’t exist in 1999, have gained momentum far more quickly among the general population than they have in corporations. Customers are connecting and sharing information at a far faster rate than the companies that serve them. There’s no question that when it comes to social networking, companies lag behind their markets.

Networked conversations are enabling powerful new forms of social organization and knowledge exchange to emerge. As a result, markets are getting smarter, more informed, more organized. Participation in a networked market changes people fundamentally. People in networked markets have figured out that they get far better information and support from one another than from vendors.

Think about where you go when you want to make a buying decision today. In general, you go to peers first. If you want to go to a restaurant, you might go to Yelp or Urban Spoon to read recommendations and reviews from customers. Booking a hotel? If you care about comfort and service, you might go to hotels.com to read some reviews, or if price is a priority, you might go to Priceline where you can set your own price. Want to watch a movie? You can find the best picks at Rotten Tomatoes, Netflix or IMDB, where movie-watchers have a voice.

Companies can now communicate with their markets directly. If they blow it, it could be their last chance.

Some companies have figured out how to create these kinds of direct relationships. Amazon allowed customers to write negative reviews on the store’s website since the day they launched. That was a controversial decision at the time. Why would a retailer allow anyone to post information that would help a customer make a decision not to buy something? Jeff Bezos recalls a publisher calling him and saying “I don’t think you understand your business. You make money when you sell books.” But Bezos knew better. He understood that what connected customers value is a company that will help them make better buying decisions. And today we all understand that.

There are no secrets. The networked market knows more than companies do about their own products. And whether the news is good or bad, they tell everyone. Companies must ask themselves where their corporate cultures end. If their cultures end before the community begins, they will have no market.

When the Cluetrain Manifesto was written Dell was the poster child of the PC industry, a company that had grown from a college kid’s startup to a $12 billion technology leader in just 13 years. But in 2005, Dell learned a tough lesson when they shut down peer-to-peer customer forums in 2005, and Dell customer (and blogger) Jeff Jarvis, who had recently bought a machine that almost immediately malfunctioned, expressed his dissatisfaction on the web in a post titled “Dell lies. Dell sucks.” Jarvis coined the term “Dell Hell,” saying Dell didn’t “respect [customers] enough to listen to them. Within a week, Dell Hell was a story in the New York Times and Business Week. Hundreds of other bloggers chimed in to tell their “Dell Hell” stories, Dell remained silent, and the PR nightmare snowballed. Dell sales plummeted along with its reputation. At the time, Dell had an internal policy not to communicate not to reply publicly to blogs.

Dell hell

Dell has learned from its mistake and in 2010 launched a customer listening command center to monitor and proactively respond to online conversations, and Founder and CEO Michael Dell is active on social media, engaging with customers directly.

If that isn’t enough, Wikileaks has demonstrated definitively that no secret, corporate or political, is safe for long.

There are two conversations going on. One inside the company. One with the market. In most cases, neither conversation is going very well. Almost invariably, the cause of failure can be traced to obsolete notions of command and control.

So far, the market conversation is doing better than the internal one. Most companies still see social media as primarily a marketing function, a new communication channel, as opposed to a fundamental shift from one-to-many broadcasts to peer-to-peer conversations. But as companies engage with customers they will find that they won’t be able to respond effectively without internal social networks that mirror the ones their customers are using.

The Law of Requisite Variety, a concept from information theory, says that a system can’t stabilize unless it is capable of states that match the variety of states in its external environment. In other words, if you want to engage in a high variety of external activities, you will have to create a system that allows for an equal amount of variety in your control systems. Most companies are still figuring that out.

To traditional corporations, networked conversations may appear confused, may sound confusing. But we are organizing faster than they are. We have better tools, more new ideas, no rules to slow us down. We are waking up and linking to each other. We are watching. But we are not waiting.

In 1999, statements like the ones above seemed a bit hyperbolic to many business executives, but today most businesses are paying attention.

Customers have begun to recognize, and exercise, their power. This power, in and of itself, is not necessarily new. Customers have always had the power to choose what they wanted to buy. They have always had the power to share their experiences with friends and peers. They have always had the power to promote, or demote, a company based on what it promised and what it delivered. Customers have always been able to vote with their wallets.

But they weren’t connected. And that little thing we call linking makes all the difference.

Any dictator will tell you that in order to control the state, you must control the media. So ask yourself: who controls the media today? And which way are the trends heading?

We’ve been saying the customer is king so long that it has become a cliché. And in most cases, our actions don’t match those words. But customers will be kings and queens, not only in name but in fact. One by one, customers are recognizing the power that comes from a world where their choices are infinite and their voices are amplified. They are connecting. They are organizing. They are gaining mass and momentum.

Despite Martin Luther and his theses, the Catholic Church is still here today, and although its power and reach is greatly diminished it will not be going away any time soon. And big business isn’t going away either. But the landscape is shifting, and there are few in business today who would deny it.

To think that this customer revolution won’t affect your business is naive. It will affect every business. It is already shifting the balance of power. It will change the way power is controlled and exercised. It will change the way companies are organized and the way they do business.

Eventually every customer will be a connected customer. And if you want to win over connected customers, you will need to become a connected company. If you’re already on this journey, congratulations. If not, today is a good day to start.

As always, your comments, thoughts and feedback are much appreciated.

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