New Marketing Summit: Dancing Shoes for Honeybees - Don Peppers

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The "word of mouth" references customers share with each other have always been more important to a business than any amount of advertising or sales effort. But with the personal mobile technology (PMT) available today, and even richer connectivity tomorrow, word-of-mouth will eventually be the dominant means by which market knowledge (and perhaps most knowledge) is disseminated among people. The video and photo capabilities of PMT will help people connect to each other, while at the same time threatening personal privacy in unprecedented ways.
From posted reviews to online user groups to social networks, customers can use PMT to "co-create" their own products and specify their own service levels. They will use PMT to band together and submit collective bids to sellers. They will use it to confirm "presence" in a physical location, such as a stadium, or a shopping mall. They will use it to track individual people, whether friends and loved ones or spouses suspected of infidelity. And even though networks of consumers will act rationally most of the time, occasional episodes of irrationality and unpredictability can still turn your business into an overnight success or ruin it in a flash, for no apparent reason.
In this keynote presentation, best-selling business author and consultant Don Peppers mixes humor, inspiration and analysis to paint an irresistibly compelling picture of business competition in the 21st Century, when pervasive and inexpensive PMT empowers consumers to connect at will

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  • New Marketing Summit: Dancing Shoes for Honeybees - Don Peppers

    1. 1. Dancing Shoes for Honeybees Customer Empowerment and Personal Mobile Technology Don Peppers New Marketing Summit Boston 14 Oct 2008
    2. 2. Competing in the customer-centric dimension Maximize the value created by each customer Maximize the value created by each product Share of customer Market share Customer Needs Satisfied Customers Reached Product-Centric Marketing Customer-Centric Marketing
    3. 3. Customers create value in two ways… <ul><li>Short term: They buy products in the current period, generating sales and costs </li></ul><ul><li>Long term: They change their intent to buy, or their likelihood of buying, in future periods </li></ul><ul><ul><li>Suppose a good customer calls you with a complaint… </li></ul></ul>
    4. 4. The “Goldfish Principle” <ul><li>Some species of tropical fish have no territorial memory </li></ul>Businesses operating on the Goldfish Principle have no customer memory To customers, a company with no customer memory may appear nonsensical, or even hostile
    5. 5. Succeeding against your competitors… <ul><li>Why does a customer choose you instead of one of your competitors? </li></ul><ul><li>Two marketing professors asked thousands of business executives this question… </li></ul><ul><li>Answers in all industries are remarkably similar: </li></ul><ul><li>“ ...trust, confidence, strength of customer relationships...” </li></ul>
    6. 6. Now consider your customer value proposition <ul><li>A customer creates the most value for you when you create the most value for him </li></ul><ul><li>But when does this happen? </li></ul><ul><li>Maximizing the value customers create requires you to earn their trust </li></ul>
    7. 7. Customers are social animals… <ul><li>Bees and ants share information about new discoveries for the benefit of the group </li></ul><ul><ul><li>Ants leave chemical trails, and honey bees do a complex kind of dance </li></ul></ul>
    8. 8. The Honeybee “Waggle Dance” Source: Bienentanz, Gesellschaft fur Kommunikation, Berlin, 2002
    9. 9. Now suppose you were a food source for bees… <ul><li>But a bee will only do his dance to tell the other bees about you if he was satisfied with the nectar </li></ul><ul><li>Moral: In the absence of communication among your customers, advertising rules </li></ul><ul><li>Once your customers communicate with each other, it’s the customer experience that counts </li></ul>Bright colors and a sweet fragrance can get any exploring bee to take a look
    10. 10. Our reputation precedes us electronically now… <ul><li>Disappoint one customer and thousands of others will soon learn of it </li></ul><ul><li>Yankelovich asked consumers what they would do if a business violated their trust: </li></ul><ul><ul><li>76% would tell friends and associates </li></ul></ul><ul><ul><li>12% would write about it online! </li></ul></ul>
    11. 11. And we’ll never be less connected, always more <ul><li>If Facebook were a country, its population would make it 12 th largest in the world </li></ul><ul><ul><li>Between Mexico and the Phillipines </li></ul></ul><ul><li>In 2006, one out of every eight couples who married in the US met each other online! </li></ul>
    12. 12. Social network power <ul><li>As the cost of connecting continues to plummet, consumer connections blossom </li></ul><ul><ul><li>And consumers increasingly influence other consumers </li></ul></ul><ul><li>Customer review sites spring up everywhere </li></ul><ul><ul><li>Tripadvisor.com, Angies List, epinions </li></ul></ul><ul><ul><li>Ratemyprofessor.com (universities and instructors) </li></ul></ul><ul><ul><li>Vault.com (employers) </li></ul></ul><ul><ul><li>Healthcarecommision.org.uk, healthgrades.com </li></ul></ul>
    13. 13. Honeybees dance about everything! <ul><li>You can’t un-Google yourself. </li></ul><ul><li>Linda Kaplan Thaler, CEO, Kaplan Thaler Group </li></ul>
    14. 14. Customers assert their new social power easily <ul><li>August 2007 – HSBC forced to reverse course </li></ul><ul><li>Over the summer it had dropped its policy of free overdrafts for university students </li></ul><ul><li>By using Facebook, students connected with others to organize a protest of this new policy </li></ul><ul><li>Soon HSBC reinstated the free overdraft policy </li></ul>
    15. 15. The rule of “preferential attachment” <ul><li>Networks of customers evolve over time… </li></ul><ul><ul><li>A social network starts with two people knowing each other, then a third is added, and so forth </li></ul></ul><ul><ul><li>Each new friend is added to the network by his or her connection to an existing member </li></ul></ul><ul><li>Preferential attachment: </li></ul><ul><ul><li>While each new attachment is random… </li></ul></ul><ul><ul><li>… each new member is more likely to connect with someone who already has more connections </li></ul></ul><ul><li>Preferential attachment means networks form in a path dependent way </li></ul>
    16. 16. Networks grow in an evolutionary fashion <ul><li>Adaptation and “fitness” are key determinants of the influence or wealth of various participants </li></ul><ul><li>A “fitness landscape” is filled with local optima that attract individual participants </li></ul>
    17. 17. Path dependence leads to unpredictability <ul><li>In 2007 the Wall Street Journal examined 25,000 user posts on six “sharing and collaboration” Web sites </li></ul><ul><li>13% of Netscape’s “most popular” postings were done by a single user </li></ul><ul><li>900,000 registered users on Digg, but one third of home-page postings come from just 30 users </li></ul><ul><li>Reddit’s most widely read user, Adam Fuhrer, has millions of page views, including MS Vista reviews </li></ul><ul><ul><li>Adam Fuhrer is just 12 years old, and attends an elementary school in Toronto </li></ul></ul>
    18. 18. The only way to succeed: <ul><li>Build and maintain a reputation for trustworthiness </li></ul>
    19. 19. The need for more trust has boosted business <ul><li>Lack of trust slows transactions down and imposes frictional costs </li></ul><ul><li>When more trust is required , business thrives, as obstacles are reduced </li></ul>Case in point:
    20. 20. <ul><li>A study of one financial firm’s 6700 customers separated referral value (“CRV”) out of LTV </li></ul><ul><ul><li>68% of these customers expressed their intention to refer the company to other people, but </li></ul></ul><ul><ul><li>Only 33% followed through </li></ul></ul><ul><ul><li>14% generated new business for the firm, </li></ul></ul><ul><ul><li>And just 8% actually became profitable customers </li></ul></ul><ul><li>Also, highest spending customers are not always the most valuable in terms of referring others </li></ul>Analyzing a customer’s referral value Source: “How Valuable is Word of Mouth?” Harvard Business Review, October 2007
    21. 21. At one telecom company Source: “How Valuable is Word of Mouth?” Harvard Business Review, October 2007
    22. 22. DoubleClick identified network “influencers” <ul><li>Quantitative survey of 6000 Web users found 1000 influencers with certain traits </li></ul><ul><ul><li>“ People often ask my advice about…” </li></ul></ul><ul><ul><li>“ I am an expert in certain areas…” </li></ul></ul><ul><li>Influencers </li></ul><ul><ul><li>Use the Web more than twice as much </li></ul></ul><ul><ul><li>Pay more attention to online ads, and want more relevant messages </li></ul></ul><ul><ul><li>But also more likely to clear their cookies regularly, as well as fast forwarding through video commercials </li></ul></ul>
    23. 23. Influential people within social networks <ul><li>Influencers and connectors are curious and inquisitive people. </li></ul><ul><li>They want to know but they don’t want to be sold to. </li></ul>
    24. 24. <ul><li>In 2005, one influential blogger wrote about his bad service experience with Dell Computer </li></ul><ul><ul><li>This “Dell Hell” story cascaded online as more people commented about their own bad experiences </li></ul></ul><ul><ul><li>Then Businessweek and The New York Times picked it up </li></ul></ul><ul><ul><li>Dell’s reputation suffered terribly, and its financial results declined, as well </li></ul></ul><ul><li>One year later, a UK consulting firm analyzed the incident and concluded it was not really Dell’s fault at all </li></ul><ul><ul><li>Most of the controversy was generated by errors and misinformation, passed along by a few key influencers </li></ul></ul>And sometimes influencers are just wrong! Source: Paul Gillin, The New Influencers, 2007
    25. 25. So be careful when you try to generate “WOM” <ul><li>A cautionary tale: Staples’ word-of-mouth marketing campaign, called Speak Easy </li></ul><ul><li>Despite its careful architecture, the press portrayed it as sneaky and manipulative </li></ul><ul><li>You can’t manufacture “authentic” word of mouth </li></ul><ul><li>If it isn’t spontaneous, then it isn’t authentic! </li></ul>
    26. 26. WOM is inherently unpredictable <ul><li>JupiterResearch: </li></ul><ul><ul><li>Only 15% of viral marketing efforts actually generate positive word-of-mouth! </li></ul></ul><ul><li>No matter how delicious your nectar is… </li></ul><ul><ul><li>… you can’t always control what the honeybees will dance about </li></ul></ul>
    27. 27. The human brain is a “prediction engine” <ul><li>Complex tasks are managed easily, until something violates our expectations… </li></ul>“ Our brain is structured for constant forecasting.”
    28. 28. Groups can be intelligent prediction engines, too <ul><li>Groups of people make collective decisions much better than even expert individuals do </li></ul><ul><ul><li>As long as a group includes a diverse set of people making independent decisions </li></ul></ul><ul><ul><li>It isn’t the number of experts in the group, but the diversity of perspectives that counts </li></ul></ul><ul><li>“Decision markets” predict sporting events and election results with great accuracy </li></ul><ul><li>The market for orange futures predicts Florida weather more accurately than meteorologists do </li></ul>
    29. 29. Where were you at 11:39 am, January 28, 1986? <ul><li>Four key space shuttle contractors </li></ul><ul><ul><li>Rockwell built the Challenger and its engines </li></ul></ul><ul><ul><li>Lockheed managed ground support </li></ul></ul><ul><ul><li>Martin Marietta manufactured the external fuel tank </li></ul></ul><ul><ul><li>Morton Thiokol built the solid fuel boosters </li></ul></ul><ul><li>“ No clues” on the day of the event, and the actual investigation required six months to complete </li></ul><ul><li>But by 11:50 am, Thiokol’s stock was down the most and remained lowest throughout the investigation </li></ul>
    30. 30. Where were you at 11:39 am, January 28, 1986? <ul><li>How did the market know ? </li></ul>
    31. 31. Diverse perspectives are the key <ul><li>The most important requirement for making intelligent group decisions and predictions: </li></ul><ul><ul><li>A d i v eR s i t y of perspectives </li></ul></ul>
    32. 32. Businesses can harness “decision markets” <ul><li>Rite-Solutions (software for military applications) began internal stock market for product ideas in January 2005 </li></ul><ul><ul><li>55 stocks listed on “Mutual Fun,” each with detailed description, and each trading at $10 per share initially </li></ul></ul><ul><ul><li>Employees bet up to $10,000 in “opinion money,” and also lend support by volunteering to work on project </li></ul></ul><ul><ul><li>Winners share in proceeds of new products if successful </li></ul></ul><ul><li>Biggest win so far is a type of 3-D visualization software initially rejected by “experts” in R&D department </li></ul><ul><li>One year later, VIEW accounts for 30% of sales! </li></ul>Source: “Under New Management,” New York Times, 26 March 2006
    33. 33. Decision markets are now widely employed <ul><li>Best Buy uses its own decision market, called “TagTrade,” to predict: </li></ul><ul><ul><li>Which products will sell best in which stores </li></ul></ul><ul><ul><li>Whether sales forecasts are accurate, and whether marketing programs will be successful </li></ul></ul><ul><li>Google uses decision markets to predict: </li></ul><ul><ul><li>Demand for Gmail subscriptions </li></ul></ul><ul><ul><li>Product launch timetables </li></ul></ul><ul><li>GE, Microsoft, Intel, other companies are all experimenting with decision markets </li></ul>Source: Wall Street Journal, Sept 16, 2008
    34. 34. Moore’s Law and Metcalfe’s Law Gordon Moore Bob Metcalfe
    35. 35. Networking and computation: Implications <ul><li>100 million+ Google searches every day </li></ul><ul><ul><li>How were these questions answered before Google? </li></ul></ul><ul><li>Last year 3000 new books were published… </li></ul><ul><ul><li>… every day! </li></ul></ul><ul><li>In 2008, more new and unique information will be generated than in the previous 5,000 years </li></ul><ul><li>The amount of new technical information is roughly doubling every two years </li></ul><ul><ul><li>By 2015, it will be doubling every 72 hours! </li></ul></ul>
    36. 36. In the words of William Gibson: <ul><li>“ The future is already here. It’s just not evenly distributed yet.” </li></ul>
    37. 37. What we can expect in a PMT-enabled future: <ul><li>Personal mobile technology will dramatically change our lives in three general areas: </li></ul><ul><ul><li>Transacting and doing </li></ul></ul><ul><ul><li>Connecting and networking </li></ul></ul><ul><ul><li>Sensing and understanding </li></ul></ul>
    38. 38. 1. Transacting and doing <ul><li>“ A mobile phone is just a credit card with an antenna…” </li></ul><ul><li>Richard Fairbank </li></ul><ul><li>Founder and CEO, Capital One </li></ul>
    39. 39. 1. Transacting and doing <ul><li>Commercial transactions can pay the costs of connectivity and technology </li></ul><ul><li>Free SIM card, just apply </li></ul><ul><li>You must be 16 to 24 </li></ul><ul><li>43 free minutes a month </li></ul><ul><li>216 free texts a month </li></ul><ul><li>Earn more by clicking ads or buying products </li></ul>How Blyk uses its customers’ social networks
    40. 40. 1. Transacting and doing <ul><li>Commerce will drive technology further </li></ul><ul><li>Partnering with Thales, maker of inflight entertainment systems </li></ul><ul><li>Soon to offer 1-to-1 entertainment and advertising to passengers </li></ul>
    41. 41. 1. Transacting and doing <ul><li>Excerpt from Jetera’s promotional film for advertisers </li></ul>
    42. 42. 1. Transacting and doing <ul><li>Entertainment, fun, amusement, games </li></ul><ul><li>Portable multimedia players </li></ul><ul><li>Mobile gaming </li></ul><ul><li>Automotive infotainment </li></ul><ul><li>Real-time reality shows </li></ul><ul><li>“ Concerts” with PMT devices sounding like different instruments or voices </li></ul><ul><li>Sports events viewed from others’ seats </li></ul>Coming soon?
    43. 43. 2. Connecting and networking <ul><li>Location-based services </li></ul>
    44. 44. 2. Connecting and networking <ul><li>Location-based networking </li></ul><ul><li>Traffic reports based on actual real-time traffic </li></ul>
    45. 45. 2. Connecting and networking <ul><li>Location-based presence </li></ul><ul><li>When you access Facebook or Twitter, don’t you want to know who else is “present”? </li></ul><ul><li>PMT allows “presence” and “location” to be combined </li></ul><ul><li>Real-time traffic and weather reports, with local comments and details from other users </li></ul><ul><li>Go to the mall, the game, or the concert, and detect which friends are there with you, locally </li></ul>Coming soon with PMT?
    46. 46. 3. Sensing and understanding Technology will get better and better at enhancing our bodies
    47. 47. 3. Sensing and understanding But sensory enhancements will be first
    48. 48. 3. Sensing and understanding <ul><li>Collective power of sensory inputs </li></ul><ul><li>What would “the news” be today without on-the-scene people videoing crimes and disasters? </li></ul><ul><li>Now imagine millions of mobile, networked cameras uploading their images, 24/7 </li></ul><ul><ul><li>How “real” will real-time news actually be? </li></ul></ul><ul><ul><li>And soon you’ll be sorting through these images with software that recognizes locations and faces! </li></ul></ul>
    49. 49. 3. Sensing and understanding <ul><li>“ Cloud sensing” using collective inputs </li></ul>Source: Economist, Sept 25, 2008 <ul><li>Earthquakes can be detected using a few thousand individual laptops </li></ul>Jesse Lawrence Asst Prof of Deep Earth Seismology Stanford
    50. 50. 3. Sensing and understanding <ul><li>Network-enhanced understanding </li></ul><ul><li>Sensory inputs drive our brains – our “prediction engines” </li></ul><ul><li>As a network with linked senses, the collective human race is destined to become more intelligent on its own </li></ul><ul><li>Voice-analysis lie detectors and emotion sensors </li></ul><ul><li>Molecular “sniffers” and pheromone detectors </li></ul><ul><li>Sensors operate both locally and remotely, by proxy </li></ul><ul><li>Ad hoc “smart networks” of connected users anticipating events, collectively </li></ul>Coming soon with PMT?
    51. 51. We are already merging with our technology
    52. 52. Give your honeybees dancing shoes <ul><li>Improve your “architecture of participation” </li></ul><ul><ul><li>Make it easy, interesting, and rewarding for customers </li></ul></ul><ul><li>3M relies on “lead user” customers to experiment with home-made improvements and upgrades </li></ul><ul><li>National Semiconductor provides an online platform for customers to design their own product improvements </li></ul><ul><ul><li>Customers generate 20,000 new ideas each month! </li></ul></ul><ul><li>Innocentive signed up 30 blue-chip firms and more than 90,000 independent professionals, from 175 countries </li></ul>Source: “Under New Management,” New York Times, 26 March 2006
    53. 53. Help your honeybees dance with PMT <ul><li>Have fun, and let your bees have fun! </li></ul><ul><ul><li>People like to connect with other people – your corporate mission should help them do this! </li></ul></ul><ul><li>Provide useful, location-based information </li></ul><ul><li>Let customers sign up “buddy lists” for checking their friends’ presence at your location </li></ul><ul><li>Facilitate networked, moderated reviews of products and services, including your own </li></ul>
    54. 54. And remember: People are just big honeybees!
    55. 55. Peppers & Rogers Group <ul><li>Management consultants in customer strategy issues </li></ul><ul><li>Magazines, newsletters, research white papers </li></ul><ul><li>Offices around the world Norwalk, Minneapolis, London, Brussels, Istanbul, Dubai, Sao Paulo, Mexico City, Singapore, Sydney </li></ul>To subscribe to the “1to1 Weekly” email newsletter: [email_address]

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