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The Age of the Customer

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This chapter from The Opt-Out Effect explains that, as marketers, we need to upend our thinking about “managing customers.” We need to give customers control, with digital tools and assets to manage their own empowered relationships. If you don’t provide customers with relationship control, customers will seize it anyway, and opt out from your brand.
This chapter is from the book

A tectonic shift is taking place as the economy transforms into the digital economy of the twenty-first century. Clearly visible on the surface, but still not well understood by many brand marketers, is a struggle for power and influence between companies, marketers, and brands on the one hand, and consumers, customers, and their government agencies on the other. We see not-so-subtle symptoms in surprising corners of the corporate world; for example, Microsoft laying off thousands of employees in its mobile phone business, purchased from Nokia only a year ago—once the dominant brand in mobile phones in the early 2000s—as Microsoft tries to transform itself from a desktop computer brand into a cloud computing or mobile brand.

We see the struggle too in a faraway corner of the digital world where a lone programmer, Marco Arment, created a mobile app, called Peace, that filtered out mobile ads and personal online tracking on apps and websites. Mobile ads slow down page loads, drain battery power, and waste data bandwidth, and they open the door to malware and fraud. At $2.99 it instantly shot up to #1 in the US Apple App Store—where it remained for 36 hours. But Marco removed his app just as quickly as he put it up. Why? Because it had the potential to destroy the profit potential of many small (and large) mobile developers and brands—because these brands fundamentally rely on mobile advertising. Marco framed his pivotal move in prescient terms—as a small but significant cog in a war between consumers and advertisers:

The instant popularity of Peace—like the market success of Uber, Instagram, or Tumblr (also created by Arment)—demonstrates the vast market power being accumulated by consumers as they move about with ease in a mobile and nimble world of rapidly changing and disintegrating digital technology. Yet the struggle between marketer and customer is not about technology per se—digital technology is merely an enabler. Consumers don’t care whether Apple’s iOS mobile platform, or Google’s Android, or the Windows Phone, or BlackBerry platforms win or lose. Or whether their solution is cloud based, or mobile. What they care about is getting things done—searching, sharing, solving, trying, buying—and achieving the outcomes they want simply, effortlessly, and delightfully. The implications of this shifting mindset for most marketers and brands will be defining and historic, and will be clearly evident within five years.

The Empowered Customer

The thesis of this book is that discriminating customers have never before been as empowered to take control of the customer–brand relationship—due to the confluence of three transformational market forces (see Figure 1.1).

Figure 1.1

Figure 1.1 The Empowered Customer

Search Knowledge. Search engines Google, Bing, Yahoo, Ask, or AOL enable customers to effortlessly shop, search, and compare information on any product or service—new, existing, or obsolete—to obtain replacement parts, to access product information (manuals, operating instructions), and to obtain advice from social message forums, product use forums, and “how-to” videos on YouTube channels. Because of their search knowledge, customers have the power to demand better performing products and services, and more favorable prices.

Mobile Agility. Mobile platforms such as Apple iOS, Android, BlackBerry, or Microsoft Windows facilitate access to the vast trove of online information regardless of geographic location—on site at retail comparing a retailer’s prices with other competing retailers, or using GPS to suggest nearby shopping alternatives. Because of their mobile agility, customers have the power to substitute immediate and proximal product and service alternatives, dramatically leveraging their ability to negotiate prices and product/service preferences.

Social Power. Facebook, Google+, Twitter, Reddit, Tumblr, LinkedIn, YouTube, Pinterest, Path, or Pheed enable buyers to share, counsel, blog, seek advice, and engage in social dialogue with persons never before met, simultaneously in nearby and distant places, but with common interests and goals, at this very moment in time. Because they are socially connected, customers have greater power to demand equity and fairness vis-à-vis other customers in the brand community, and to pose the imminent threat of broadcasting brand failures—as well as brand successes.

These forces are creating a new generation of high-knowledge buyers, who know as much or more than marketers about what it is they are buying. They know more than retail salespersons, more than telephone or chat support representatives, and often know more than the manufacturer or factory marketers themselves—because these high-knowledge buyers know of competitors across the global or the local Internet economy that the manufacturer had never thought of. The knowledge of these newly empowered customers affects everything about the way they buy—their price sensitivity, what they value, the type of information they process, the comparative shopping they do, and their expectations for performance, service, and experience.

I had an important wedding anniversary this year—all are important of course, but this one was extra special and I wanted to create a real surprise and buy a new wedding ring. I spent time online to check out the website of a local jeweler that I had done business with over the years, and found a perfect ring. After emailing the webpage to myself, I went to the jeweler’s retail store to purchase the ring. In store, the saleswoman cheerfully said “Of course, do you have the item number?” I had better than the item number: I pulled out my iPhone, opened Gmail, and showed her my mobile screen: “Here it is right here. This is your webpage with the picture of the ring and its information.” The saleswoman went into the backroom and returned with a selection of rings: “I can’t find that particular one but here is a selection of other rings that look a lot like that one.” Really? I explained why this was the ring I wanted—it was simply the one. “Why don’t you just order it,” I said. She went into the backroom again, returned and said: “That manufacturer no longer lists that ring on their website, but let me research it and get back to you.”

She got points for offering to help, but failed in the execution: Their website was wrong, and her selling assumptions were just out of date. I had already spent hours online finding the perfect ring—the type, style, color, carat, clarity—and price. Why go through that all over again in a few minutes in the store? She emailed me eight days later saying that she still couldn’t find that ring but had found yet another just like it. But I had already gone online again, found my perfect ring at another Internet jeweler—for less money. The ring arrived in two days and the anniversary was a total success. But my customer relationship with that local jeweler will never be the same—because of the transformational impact of digital. This customer had embraced omni-channel shopping (instant availability through various channels and retailers)—with expectations of a seamless experience online, mobile, and in-store—and anticipated immediate satisfaction, even delight. This retailer just had no clue what omni-channel meant, tethered to the old computer in the backroom and trying to sell their limited inventory of in-store rings.

In discussing the millennial generation’s expectations of seamlessness, Accenture said: “We define seamlessness as the ability to deliver a consistently personalized, on-brand experience for each individual customer, at every touchpoint—anytime and anywhere.”2 They identify four components of a seamless customer-facing retail experience:

  1. Customize brand offerings across channels in the ways millennials want, which typically boils down to providing better, faster, and more memorable service.
  2. Integrate operational elements so that the brand can have a single “conversation” with customers, not one that changes from smartphone to PC to physical store.
  3. IT platforms should be integrated to unify their sources of data and boost cross-channel transparency.
  4. Team up with technology, data, analytics, and process partners to provide the service performance millennials want because they will not be able to deliver it all themselves. As a result, successful players are collaborating to strengthen their customer value propositions. For instance, a third-party logistics provider can supply same-day delivery services for online purchases, enabling retailers to offer a service customers want without having to invest in an expanded delivery fleet or new routing capabilities.3

Digital has a more elemental influence on customers because of what they now can do. Customers who are digitally enabled feel a sense of new engagement, of having access to whole new capabilities that are empowering, and they want to use them, to play with them, to experiment with them—to personally experience them. And they want brands to digitally engage with them, not just provide entertaining ads. If they have good digital experience with other brands and your brand doesn’t have these digital capabilities, then they wonder why. Digital has raised customer expectations, not only about the product or brand but, more importantly, about customers’ participation with—indeed how they interact with—the brand. I did field research on brand managers and their experiences with digital in brand management. One digital marketing manager said: “They [consumers] like when they have their own voice. Even if they don’t buy it, they like to feel they changed the product—they feel fulfilled. And they like when they feel that we’re listening. It’s ‘their brand.’”

Some brands recognize all this. And they are responding, paradoxically, by giving customers even more power, by co-opting customers into the very inner core of the brand’s marketing and strategy models. For example, Amazon is getting into the video production business, like Hollywood sitcoms and movies. How does it choose from among a sizeable pool of possible movie scripts to find the right one? Rather than relying on the gut instincts of traditional Hollywood movie moguls—a last century model—Amazon deploys a proletarian strategy of crowdsourcing by going directly to its large reservoir of digitally loyal customers and polling their preferences, producing not only the customer’s choice among scripts, but also, vitally important, testing, listening, and sensing how and why the script resonates with them.

Starbucks encourages customers to engage digitally with new brand ideas to help improve their retail service model. “Share your ideas,” it says on the MyStarbucksIdea webpage; “tell us what you think of other people’s ideas and join the discussion.” At the time of writing, the site provides links to 45,430 Coffee & Espresso Drink ideas, 22,648 Food ideas, 22,308 Atmosphere & Location ideas, 11,816 Ordering, Payment, & Pick-Up ideas, and many others. Each idea gets voted on, commented on, and accrues points for customer popularity. Here are a few popular ideas: “Be able to use rewards on mobile-ordering,” posted by kaitlynseim on July 14, 2015, has accrued 1,580 points. “Please, please give me a star for each coffee I purchase,” posted by camptatum on October 1, 2012, has accrued 363,500 points. And, “Mobile apps should save favorite drink orders and favorite stores,” posted by Snow on April 1, 2015, has accrued 570 points. On the My Starbucks Idea website it lists 20 very popular ideas that “came from you, our customers,” of which 13 have been “Launched,” one is “In the Works,” and 6 are being “Reviewed.”4

Doubt that these newly empowered buyers are more knowledgeable than marketers? One Australian specialty retailer, upset at buyers who engaged in “showrooming”—browsing the retail store and then buying online elsewhere—instituted a policy of charging a $5 fee for in-store browsing. Here’s the content of the sign the store posted:5

This brick-and-mortar retailer may have been frustrated, but its shortsighted policy demonstrates clearly that it is way behind its savvy customers. Even worse, a photo of the store’s policy sign (from an amused shopper’s smartphone camera) went viral via Reddit, followed by a string of online comments under the heading “dumb retailer.” In France, the same showrooming issue surfaced when the French National Assembly introduced a “PROPOSED LAW to preserve the vitality of commerce in urban centers,” forcing French online retailers to charge the same prices as urban city brick-and-mortar retailers:

Showrooming of course is a highly rational buyer strategy to make price comparisons immediately as buyers browse websites via mobile in retail stores, or computer or tablet browser at home. Market survey company Gallup found that among “U.S. consumers, 40% claimed to have ever showroomed in the past, [although] just 6% said they had showroomed during their most recent trip to a retail store.”6 Digital researchers at BI Intelligence did a recent study of retail stores that appear to be especially vulnerable to showrooming. The ten retailers they say are most vulnerable to showroom shoppers are mainstay brick-and-mortar chains (in rank order): Bed Bath & Beyond, PetSmart, Toys “R” Us, Best Buy, Sears, Barnes & Noble, Kohl’s, Target, Costco, and JCPenney (see Figure 1.2).7

Figure 1.2

Figure 1.2 Vulnerable Retailers

Source: “How Big Retailers Are Beating Back the Mobile Showrooming Threat,” Business Insider, August 9, 2013. http://www.businessinsider.com/mobile-showrooming-threatens-retail-2013-8.

How are retail chains responding to the showrooming threat? Best Buy matches the prices of 19 major online competitors, including Amazon and Buy.com—a risky strategy competing against online sellers with minimal brick-and-mortar assets. Target introduced its own price matching policy vis-à-vis online prices from Amazon, Walmart, Best Buy, and Toys “R” Us. Target also sent an urgent letter to its suppliers asking them to create slightly differentiated products that would set Target apart from competitors and shield it from showrooming price comparisons.8 In desperation, “some retail chains are blocking cell signals in-store, or adopting proprietary barcodes that won’t allow shoppers to check prices at competitors’ sites,” said BI Intelligence—a misguided policy that only annoys powerful consumers.9

L.L. Bean has a long and famously loyal base of outdoor enthusiast customers, voted the number 2 brand for excellence in customer service and experience. But in recent years many of L.L. Bean’s customers have migrated to a digital relationship with the L.L. Bean brand. Online revenues have grown to exceed catalog orders. As phone-in order volume declined, the company closed one of its four call centers in Maine, displacing 220 year-round employees. No longer is the brand relationship driven only by product, or even by service delivery. Increasingly, the brand relationship is being driven by its digital relationship anchored in an online brand experience that envelops the customer in an experiential customer-centric world of product information, lifestyle information, and online customer sharing—all seamlessly sustained by an invisible platform of digital customer purchase and relationship data.

Yet at the same time L.L. Bean is opening more retail stores near areas where the company can offer its hands-on Outdoor Discovery Schools—sensing that physically touching is an essential complement to online experiencing the various dimensions of the L.L. Bean brand. This is an example of how the revolution of the new digital economy is changing traditional twentieth-century business models. For some categories, retail stores will increasingly become offline product showrooms (not stores to actually purchase) or fulfillment sites. For example, the Wall Street Journal cited Blue Nile, a leading online jeweler that established “web rooms” with less than 500 square feet each—about one-sixth the size of a typical jewelry store. The web rooms have available 300 sample rings for trying on, and consumers then pick a diamond from one of 200,000 that Blue Nile displays on its website. Blue Nile “is able to turn its inventory about 11 times a year compared with about twice for a typical jewelry chain. And Blue Nile doesn’t have as much risk because it waits for a customer to place an order before taking possession of the goods, reducing its working capital needs.”10

Macy’s is similarly testing offline showrooms with its swimsuit and workout categories. “Instead of stuffing racks with every size and style in these departments, Macy’s displayed only one item of each style. Shoppers used an app on their mobile phones to alert Macy’s sales staff of the style and size they wanted to try on and that item was sent to a specified dressing room.”11

Home Depot is investing in what they call “Interconnected Retail,” a seamless platform across all commerce channels with an enhanced web and mobile experience, and online sales conversion. Forty percent of online orders were picked up in stores through its BOPIS (Buy Online, Pickup In Store today), BOSS (Buy Online Ship to Store), and BORIS (Buy Online, Return In Store) programs. They are now piloting BODFS (Buy Online Deliver From Store). They are further investing in large-scale direct fulfillment centers to facilitate Amazon-like direct-to-customer delivery with the capability to deliver 90% of their customers’ parcel orders in the United States within two days.

Zappos is the largest online shoe store in the world, but not because of competing on price. Its founding vision in 1999: “One day, 30% of all retail transactions in the US will be online. People will buy from the company with the best service and the best selection. Zappos.com will be that online store.” Shoes have to look good on you, and they have to fit. So you have to try them on—that’s why you go to your local shoe store. Zappos gets it perfectly: They have an unlimited returns policy, free shipping, and 24-hour generous customer service. This customer’s sentiment was common among Zappos’ customers:

Now Zappos is experimenting with retail partnerships with small mom-and-pop brick-and-mortar stores, giving it a physical presence to augment its cloud-based business model. “The convergence of online and offline seems to be an unstoppable force that I believe will ultimately change the face of retail,” Zappos CEO Tony Hsieh explained. “We are currently in a really interesting time for retail where on one hand many online stores are looking to have more of a brick-and-mortar presence for branding purposes (which is a big part of why we are launching a 20,000-square-foot Zappos pop-up shop in downtown Las Vegas for the holidays) and on the other hand many brick-and-mortar stores are looking to enhance their experience with more access to inventory in the cloud.”12 Note the trends here: inventory is being stored centrally in the cloud, while brick-and-mortar stores are situated locally to enable customers to conveniently experience the brand—to try on, get personal advice, and get customer support.

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