ParisTech Review / Editors / 2014-10-23
Whatever form it may take, the enterprise of the future will strive to fulfill its traditional purpose: serve and satisfy its customers. But in achieving this objective, it will need to take into account a completely new reality: current technologies provide customers with knowledge which transforms them into a source of proposals. Vendors need to reassess their relationship and balance of power with the customers. Faced with consumers who can search for information, form groups and publicly express their opinion through electronic media and social networking, goods producers and services providers will inevitably have to step down from their comfortable heights and start thinking in terms of coproduction with a customer who will become a prosumer: i.e. a consumer who wants to become an increasingly influential actor of the development of goods and services. In both B2C and B2B, the boundary between producers and consumers is already fading in favor of a completely different configuration. Ad hoc coalitions will form and fall apart, based on the model of the crowd. These will consist of businesses and customers working together to provide increasingly comprehensive services within a functional economy, driven by use rather than by possession.
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This article is the second of a series which will be published within the next three months.
The 1999 Cluetrain Manifesto opens with these prophetic sentences: “Networked markets are beginning to organize themselves faster than the companies that have traditionally targeted them. Thanks to the web, these markets are becoming better informed, smarter and request more qualities, something that most companies lack.” And the authors of the manifesto state the famous motto: “Markets are conversations.”
Markets as conversations
The 1999 intuition has become the key to many business strategies, especially since social networks gave customers a unique opportunity to express themselves. In 15 to 20 years, it could simply be the normal basis of any business relationship. When selling a product or a service, technical compliance and performance will be increasingly taken for granted. Value will come from something else.
Two trends are emerging. The first is the development of an economy of solutions in which goods will also be services, grouped in packages that offer to customers, beyond the property of an object (say, a car), access to different uses (in this example, uses linked with transport, with activities than can be performed during the transport time released by automatic driving, etc.). As written by Michèle Debonneuil, “solutions do not ignore industrial products, but they use them in a different way: the production of goods in the traditional sense is simply about manufacturing and selling, in the best case, to ensure after-sales service. The solutions are rather focused on downstream use by consumers. They are basically focused on the individual (i.e. human centric).” The performance or robustness of a good is dwarfed by the quality of the flows it is part of and the “user experience” of the features to which it gives access. The customer is becoming a user and the industrial company becomes a provider of personalized services.
The second trend is that the customer/user will produce – whether intentionally or not – data that the company will collect and interpret, to assess the consumers’ satisfaction, of course, but also to understand their uses, habits, tastes, in order to offer them new features. Big Data, by transforming the customer into an information producer, gives a new meaning to the idea of the market conceived as conversation: a simple – but rich – exchange of digital data.
In dealing with individual, private consumers, the main challenge will be to assess in real time the customer’s state of mind, somewhere between functional satisfaction and emotion. Grouping customers based on their emotional involvement, and doing it using digital tools, will be one the most important markers of success. A satisfied customer will naturally become, at virtually no cost, a commercial agent of unequaled efficiency. This kind of customer may often become a better expert on the product and its environment than most professional sales agents.
The prosumer will become a brand ambassador. The gradual transformation of the customer as a stakeholder of the so-called “brand community” should bring many implications to the business model. A company that can rely on its most motivated customers to sell products can dedicate its internal professional sales force to higher internal business functions, especially cross-selling (exposing consumers who have already bought to related products) and up-selling (selling higher-class products to these same customers). In this approach, skilled and unpaid clients cooperate actively by taking important responsibilities for the company. This transfer of responsibilities also implies risks that must be managed at the highest level of the company. The brand’s stability or sustainability are at stake.
Will this “recruitment” of the client, inseparable from his rise to power, spare the business-to-business model? Quite the contrary. What is true for individuals is even the more so for organizations and, as noted by Jerry Wind (Wharton School), differences between BtoB and BtoC now tend to fade, especially because of the empowerment of individuals, who now have access to a level of information often comparable to that of professionals. However, the evolution of BtoC and BtoB could be quite different, simply because it won’t be the same baseline situation.
Although it is more formalized and seemingly more rational than BtoC, BtoB has a certain opacity, due to the disjunction between the buyer (typically, the purchasing department) and the user (a specific service of the company). Michael Solomon reminds us that “purchasing decisions made by businesses often involve many people, who may be responsible for the purchase, influence directly or indirectly this decision or use the product or service.” Despite or because of this complexity, the business relationship between a company and its subcontractors is generally more durable and customers have more power against the vendor. Buyers are professionals used to technical sales and to marketing carried out by vendor companies. In a situation of monopoly or oligopoly, they know that the vendor depends on its customers. As part of this asymmetrical relationship, a certain opacity has long been considered necessary by providers who don’t want to see their margins reduced to zero. But the culture of transparency is powerful and in the open world of the Internet, information flows freely and quickly. Resisting this trend may not be wise.
Actually, the sharing of information, rather than its withholding, could become an asset. Business transactions will be accompanied by data flows in both directions. BtoB is now lagging behind web-marketing practices developed in BtoC, but the importance of the “conversation” is not lesser: quite the opposite. Sharing technical specifications yesterday, integrating providers in the processes today, will be completed by a full integration of user feedback. The client, through his manufacturing process, has already stepped inside the vendor’s factories. Vendors, in turn, will enter into the client’s world, not only with the traditional figure of the representative, but through information flows. They will collect vast amounts of data that they won’t keep for themselves but share with their customers: the quality of these exchanges will determine their business relationship.
The metamorphosis of commerce
Jostled by the ultra-client, the commerce paradigm will continue its metamorphosis. As explained by Cap Gemini in a 2013 report, the new coalition of actors driving the “sales” will design products and services, composite solutions. The member companies of this coalition will strive constantly to justify their legitimacy and added value. To defend their position against the competition, vendors must become proactive, not just meet the demand. Instead of a standard product or service, the customer will request a personalized experience from the beginning to the end: he shall want to participate in an open and recognized manner in the creation of this experience. As for the company, it will have to offer this customization, while containing costs. To resolve this paradox, it should rely on technology.
Transformed to some significant degree into a media striving for an audience, the company will need to equip itself accordingly, so as to best animate the new business relationship. More specifically, it will need analytical tools to monitor the activity of its customers in the various groups to which they belong, in order to reflect two complementary wishes of the customer of the future: be considered individually, as a person, but also socially, as a member of one or more communities. Companies will invest in tools – mostly, but not only, data driven – that will help them analyze and anticipate trends.
In a 2009 report on the “purchase decision journey,” McKinsey consultants insisted on the delinearization of the process. During a long time, the metaphor of the funnel was able to account for the evolution of a consumer facing several brands and driven irreversibly by the forces of marketing towards one of them. Within the funnel, guided by the competing marketing forces of different brands, the consumer went through several stages: awareness, familiarity, consideration, purchase and finally, loyalty. With the Internet and social media and the possibility of interactive conversations between consumers and brands, this approach is partially obsolete because there are many more points of contact between customers and brands. Irreversibility is no longer part of the equation. Consumers examine from the start several brands and proceed to their active review with digital and social tools. After they select their brand at the time of purchase, the process is far for being over. All the post-purchase experience is crucial – it builds the “loyalty loop” – because it will determine the future purchase journeys of this consumer.
Keeping the upper hand
To maintain control of the brand in the new commercial balance, an efficient company should try to influence future behaviors and connect many sources of information to acquire a comprehensive view of the client, otherwise called “VoC” (Voice of the Customer) by experts. This evolution may involve some changes in the organization. The operational implementation of this new vision implies that three categories of talents must work closely together: salespeople, technicians and data scientists.
To acquire the enhanced knowledge of the ultra-client, information sources will proliferate. According to Walker, an American firm of marketing intelligence, the various digital channels used to interact with customers will not only change, but their relative importance will change significantly until 2020. The current ranking is as follows: email (77%), phone (76%), face-to-face contact (57%) and website (42%). In 2020, it should be replaced by another quartet: online communities (68%), followed by social media (63%), websites (61%) and email (58%). The challenge will be to provide all these channels through a globally consistent experience.
For Walker consultants, the analytical arsenal should provide at least several tools for smart data: textual analysis and email scans of customers to recognize trends; descriptive analysis to measure the health and stability of the business; predictive analysis to anticipate needs and gaps, whether expressed or not, of customers; customer profiling and segmentation to form coherent groups according to the strategic variables of the business. Tools that are able to connect the customer feedback with the financial and operational statistics of the company will also be necessary. These tools are anything but new but their real time use is a genuine revolution.
In the new ecosystem, trade is no longer the logical consequence of production. Rather the opposite: production becomes an organic part of the commercial relationship. The production operation design is based on the knowledge of customers. Companies must therefore reconsider the nature of their business activity and give it a strategic role. The company leader himself must supervise this activity. He can absolutely not delegate this task to a marketing manager. It is the only way to implement the much needed human-centric approach.
Cisco is widely regarded as a pioneer in this field and measures customer satisfaction since 1997. According to their own system, the satisfaction index has raised from to 4.06 to 4.45 over the years. An unintended consequence of this upgrade of marketing intelligence: as with all strategic assets, it will be difficult to measure its ROI in strictly financial terms. For example, the fluidity of commercial operations or improved technical manuals can have a decisive impact on client retention. The identification of at-risk clients will be more than ever a central concern. The company EMC uses for instance VoC data to determine how often and with which tool it must send software updates to a particular client.
A Copernican revolution in customer relationship
How exactly will the sprawling customer service, with branches in every department of the company, work? It may take the form of an interactive hub that allows customers to easily move between different distribution channels. Sophisticated virtual agents should collect information from the client and move within the organization in order to honor their requests, including the most complex ones. The main challenge will be to perceive the expectations and emotions of the client basically through digital interactions. Agents of the customer service – those who will give life to the digital relationship – will need a comprehensive training and a high degree of autonomy as they will hold in their hands the reputation of the brand to a much higher degree than in the old model.
What about the client? How he will make his choice? Of course, Big Data will not only be available to businesses. Customers will also be major consumers. They should want to choose how, when, and by whom to be served. They may require access to corporate data. As for the companies, this will represent both contact opportunities and risks of loss of control. As explained by Doc Searls in an interview with ParisTech Review, just like CRM (Customer Relationship Management) tools provided companies with a very precise knowledge of their customers, VRM (Vendor Relationship Management) tools are now emerging and could become standard instruments.
BtoB trade will be impacted with the end of what was called in the 1980s the “sale of solutions” (the ancestors of the “solutions” mentioned by Michèle Debonneuil). The method consists in implementing a solution for an identified client. In practice, a representative of the supplier would select customers experiencing a problem corresponding to the offered solutions. The representative would then try to hook his interlocutor and use his interpersonal skills to make his way in the client company. An analysis of the Harvard Business Review explains how this approach has become dangerous for providers who may find themselves locked into a simple price bargaining. Customers now have an excellent understanding of their problem and make very accurate requests for proposals (RFP). To exist, suppliers must build their relationship with clients as early as possible, possibly before the client even formulates a specific need. Besides, they need to think the business relationship differently: targeting agile organizations in a state of flux rather than ones with a clear understanding of their needs rather than those who have a clear vision of their needs; prefer suppliers who are skeptical about change rather than informants that are already on their side; and finally, coach the agents of change instead of questioning the sales department of their company. In short, the supplier must make a genuine Copernican revolution.
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