"The Americans have need of the telephone, but we do not. We have plenty of messenger boys,"

Sir William Henry Preece (1834-1913)*

You will not have seen these last two predicitions anywhere else…or, at least, I predict that you haven’t!

5. Rethinking Customer Rankings: Big Brother has a Product Endorsement for you!

Customer rankings may have been pioneered by the likes of Amazon, but they have become pretty mainstream. Entire sites (think Tripadvisor) have built their business around the notion of an open pulpit for customers to opine on products, services, hotels - you name it. And it’s valuable stuff. You can’t help but be drawn to the advocacy – or lack thereof – that comes attached. We have learned to live with the natural limitations of the medium – significant sample bias for example – because it’s just so authentic, and we do love a strongly argued opinion. On just about anything.

Right now, you can read 101 customer reviews on Amazon of a PNY 1GB SODIMM Memory Module; yes, an add on memory chip for your computer. You would think this would be a pretty binary post; it either works or doesn’t. But you would be very wrong. There is alot to comment on (and most of it very positive, by the way).

But the novelty can wear off? How useful is this information?

When it comes to matters of personal preference, not very. Take hotels for example; a popular hotel depends a lot on your budget and definition of “luxury”. To some, a cheap clean budget hotel is going to be #1, for others it’s nothing short of the Ritz Carlton that will do. Both customers could be right, but both could be wrong in the context of what makes the best choice for me.

What we need is published customer feedback in the context of our own personal tastes, and the good news – if you can call it that – is that we are furiously populating the web with information about our personal tastes. Social media sites already have enough information about our tastes and friends to be able to filter details about products and services and provide us with a customer ranking from people just like us. Or at least what we declare to Facebook is “just like us”. Expect highly personalized guidance on purchasing as commerce guidance, based on customer reference, has the potential to replace significant advertising resources on the web.

6. As Economies start to Recover, Business will risk Forgetting the Lessons of Customer Loyalty in a Recession.

Tough times have a habit of getting you to focus on basics. If customer acquisition is hard, companies naturally focus on customer retention. Does that mean that, with economic recovery a possibility, acquisition will become easier? If it does, will we stop worrying about retention?

At a macro level, it seems unlikely that we will return to the “go-go” acquisition years of the 90s (the Chinese market being an exception). But for many individual firms, a strong rebound in business is likely to take management’s eye off the retention ball. Loyalty is a longer term leading indicator; if short term business is good, it’s human nature to shorten horizons. At the level of an individual company, customer loyalty has a habit of becoming counter-cyclical with the economy.

On the other hand, we are experiencing a generation of managers who lived through “the great recession”. There is every reason for them to remember the lessons learned; to use better economic circumstances to build a solid foundation for good profits. An improving economy is exactly the time to create loyal customers.

Best of luck with your Customer Experience Program in 2011!

* Sir William Henry Preece (1834-1913) was a Welsh electrical engineer and inventor. Preece was an empiricist, relying on experiments and physical reasoning in his life’s work.Upon his retirement from the British Post Office in 1899, he was made a Knight Commander of the Order of the Bath (KCB).

If word of mouth effects are so powerful, why do do few firms focus on them?

There has been no shortage of research around the power of word of mouth. Most new studies barely add to the body of knowledge, we know by now that consumers are twice as likely to trust the word of a friend, colleague, or just about anyone it seems over the thousands of messages marketers throw at us every day. Companies with favorable word of mouth dynamics, such as Amazon, beat the pants off others who don't have it. Silicon valley startups, like google, build their entire business, and disrupt whole industries with growth driven through word of mouth.

And yet.

Faced with what, on the surface, is a superior business model, marketers are slow to shift gears. A 30 second superbowl add ran $3m this year, a record, while TV viewership pretty much stands still. Studies continue to show a slow allocation of funds to these programs - and that's where companies truly signal their intentions.

Superior business models beating existing models by hiding in plain sight are not new. In the 1990's, Dell trumped Compaq with the direct model and, despite years of falling behind, Compaq found it hard to respond. Southwest's business model for airlines is hardly a secret, yet it's new entrants to the market that mimic it, not existing competitors. You could be forgiven that some firms, illustrated by Circuit City, would go out of business before changing their business model.

In all these instances, firms were handicapped by significant switching costs. In the case of Compaq, reliance on an existing dealership network made the adoption of the direct model difficult. An investment in existing fleet, hub and spoke systems and labor agreements have tied the hands of the aviation industry. Perhaps switching costs explain the challenge marketers have in moving to a superior model?

Skills represent such a switching cost in some firms. Marketing leaders brought up through a world of advertising agencies, TV spend and print media have had to work hard to adjust to a digital, web based world. New media is inherently more risky, if only because returns from traditional marketing - whilst relatively poor - are well understood. Few companies can measure word of mouth, let alone guarantee it's positive generation. Customer communities? Viral marketing? Many companies will stick to what they know - even to the point of failure - because the personal risks are too high to experiment, Startup competitors lack that risk intolerance.

Customer experience is not a traditional discipline within the marketing department, not like marcom. Worse, some see it as an operational issue that transfers ownership of demand creation out of marketing and into the functions that directly deliver the experience.

There is another factor, and one I'm loathe to point out as it's far from a general observations. In some marketing departments, spend equals organizational power. And nothing gets budget like advertising. Spending a small fortune on creative for a superbowl ad is a hoot. Working with smart agency people on a campaign is fun, and the agencies take good care of their clients. Nobody wants this to end.

What should marketers do? First, the firm has to accept - at executive levels - that the model has changed and isn't going back. Once we have accepted that the current model won't work, the relative risks of new models drops. This requires a lot of alignment from the top of the firm, given the already low tenure of CMOs. Then, it's time to gain an understanding of the word of mouth capacity in your firm - NPS will do just nicely. If your capacity is too low due to you falling behind your competitors, the priority resource investments need to be around improving that score to the point that you are enabled to compete. This requires tough, cross department tradeoffs, but it's worth recalling the maxim that "nothing kills a bad product like good advertising".

Getting beyond capacity into actual word of mouth effects happens naturally for loyalty leaders and it's hard to force the issue. I'm a huge fan of creative approach to promoter activation such as those communities at Intuit Turbotax and Lego, but those companies build on already strong story. If you can get into pole position, lots of opportunities present themselves to shift the game in your favor.