25th Jan 2010
Vendor relationship management will change buyer-seller relationships by providing new means for engagement. Doc Searls highlights some of the most notable forms of VRM that are emerging.
A few months ago, Doc Searls - co-author of the groundbreaking book The Cluetrain Manifesto - was kind enough to share some of his predictions about the future of the buyer-seller relationship, forecasting that emerging technology and processes would enable customers to "carry some of the relationship weight" in what has traditionally been a very one-sided dynamic. This is what is commonly referred to as vendor relationship management (VRM). And for the second part of this interview, we’ll be looking at the kinds of vendor relationship management techniques that are emerging, and how these will ultimately provide new means for engagement.
Engagement, of course, is something of a hot topic at the moment. While customers used to be viewed as a passive and isolated audience, they are now increasingly joining communities and using social tools to express opinions and share knowledge. Brands are all of a sudden concerned that they will end up out of the loop. Businesses are faced with media fragmentation while the emergence of the ‘social customer’ has seen individuals have easy access to the recommendations of others – recommendations that individuals have much greater faith in than traditional marketing messages.
To some extent, businesses have only got ourselves to blame, according to Searls.
"In the beginning CRM was about building a 'single customer view', with lots of talk about better understanding the customer's needs, and how that should be become part of 'integrated' marketing, selling and customer service," he says. "Over the years, however, this ambition was compromised by minimal data and cost-cutting requirements. My wife, a business veteran with a long history in retailing (both at the store level and as a supplier) has observed that the trend in recent years has been to out-source support to the customer herself. "Go to our website," the call centre says. Yet typical websites are so poor at customer support that the customer is left to seek help from other customers, or from websites other than the company's own. This is why so many customers now support each other, rather than bothering with companies' own support sites and services."
Engagement of the customer is now on the agenda, however. The Annual Online Customer Engagement Report 2010 identifies a wide variety of tactics being deployed, with the use of social media to drive engagement emerging as a particularly popular opportunity for dialogue with customers and building relationships.
But to be truly customer-centric, Searls believes organisations need to think bigger.
"Friends of mine who have worked in the CRM business, and studied it over many years, tell me that in many - perhaps most - cases customer-centricity is secondary to organisation-centricity. They know of few cases where customers actually drive the company," he suggest. "Being customer-driven means a company knows what customers actually want and what they actually feel. Wouldn't it be better to know directly when a customer wants something, rather than to guess at it? Wouldn't it be better to have whatever market intelligence the customer can provide, willingly, rather than to give the customer a limited set of choices, which may exclude the one thing that might cause a sale or make a better customer?"
This is where Searls – and an increasing number of likeminded individuals – believes that VRM will emerge to fill the knowledge gaps, with a view to achieving a more granular view of what data is shared, by whom, how, where and why.
"For CRM today that equates to WHO, bought WHAT, WHERE, WHEN and HOW it was offered to them. These are all data that can be derived from a system if it is built well enough. These data can then be used to make good guesswork about WHY customers bought products, and then make educated guesses about what customers will buy next," continues Searls.
"A well designed VRM system will eliminate much of the guesswork that CRM currently involves. For example, VRM can provide customers with tools to say 'Here's what I'm in the market for', or 'Here's my current circumstances. What have you got that is relevant?' - in ways that prevent that data from being used later against the individual, or to inform guesswork that wastes both the vendor's and the customer's time and money. The customer also needs to be able to assert his or her own terms of engagement, rather than being forced to accept those required by the vendor. Customer-driven terms would naturally include commitments to pay and otherwise behave honourably; but they might also include preferences (such as 'send no junk mail' or 'email my receipts'). They might even include expressions of willingness to pay for good service."
VRM is emerging in a variety of forms, and of those being worked on at present, Searls highlighted the following:
- Personal data stores - A kind of data warehouse in which individuals store all the data about themselves, personal data stores would include information such as administrative details, transaction histories, interaction histories, supplier information, personal preferences and future plans. VRM envisions that these personal data stores can then be replicated with trusted ‘fourth parties’ to aid interactions and transactions with vendors. Mydex.org is one example of such a project.
- Simplifying personal data - Some are working on ways of simplifying and representing personal data. Azigo.com, for instance, has created software called Selector that gives individuals control of their personal data via information cards, enabling them to manage their online identities independent of any particular website. Meanwhile, Kynetx.com has been exploring architecture and creating solutions built on a rules engine for contextual customisation. The development tools will allow users to create context-sensitive, cross-platform apps to support relationships between customers and companies, with Kynetx.com integrating with information cards.
- Consolidating loyalty data - Some are working on ways of consolidating loyalty data on the customer side and reforming loyalty programs from the outside in. A good example of this is Scanaroo from Cerado.com, which allows individuals to use their iPhone to keep track of and support loyalty cards.
- Digital identity systems - All the many digital identity systems VRM components and constituents. Information cards, OpenID and XDI all seek to allow individuals to control their identity, data and relationships without vendor/provider dependence, addressing the issues associated with signing up to new sites or updating online profiles whenever your data changes. Relationship cards – also known as r-cards – are a new form of information card that has been developed by the Higgins Project. These can enable automated data sharing relationships between individuals, vendors, or vendors and individuals. Elsewhere, digital identity system communities such as IdentityCommons.org also have CRM constituents.
- Personal data analytics - Some are also working on simple customer-held means for organising one’s own data and relationships. This will enable individuals to track trends such as spending, anticipate changes after major life events (such as marriage), and use ‘people like you’ comparisons to highlight where resources could be better managed. TheMineProject.org is one such example, which allows users to take charge or their own data, arrange and share it whilst connected to the internet, whilst providing an infrastructure for VRM.
- Personal request for proposal - Here a personal request for proposal (RFP) is sent from an individual advertising his or her desire to buy a product or service at a given place and time ("and not just through a walled garden such as Facebook or eBay," adds Searls). The requests can even extend to specifications for products/services that do not even exist yet. The RFPs can take the form of one-to-one requests, from a named individual to one or more names companies; or aggregated, where multiple individuals’ requests are collated and delivered to companies by an intermediary, after which the organisation responds either individually or collectively; or anonymised where an intermediary delivers the requests and is the sole contact point for the business throughout the transaction.
- Permissions management - Permission management allows the individual to specify the rules of engagement for marketing relationships, covering both the release of information and the receiving of information. Individuals can choose what data to release to what organisations, for what purposes and on what conditions. For instance, in the US numerous organisations are working on patient control of their own health care data and relationships with health care providers. Google and Microsoft are amongst the organisations working on this.
- Other significant developments - In other VRM areas, work is being undertaken on a means for logging one's own media usage, and providing means for putting the pricing gun in customer hands, for instance ProjectVRM and its friends in various media businesses. Others are working on customer-driven terms of service, such as ProjectVRM and friends at Harvard Law School and elsewhere. And elsewhere, others are working on user driven search, outside the walled gardens of Google and Bing, with Switchbook.com being a notable example.
All of this should go some way to demonstrating the sheer volume of work that is taking place on VRM. And more importantly, it shouldn’t be dismissed as a pipedream. To demonstrate this point, Searls highlights the evolution of networks over the last two decades.
"Look at networks in the 80s and early 90s. If you wanted email, or instant messaging, you had to join a walled garden called AOL or Compuserve or Prodigy," he says. "If you were an AOL member and wanted to send an email to a Compuserve member, you couldn't. Just as today you can't use a Costco loyalty card at a Best Buy. The internet changed all that, by providing new protocols for communication that weren't owned by anybody, but could be used by anybody and improved by anybody. VRM will likewise change buyer-seller relationships by providing new means for engagement that aren't owned by anybody, but can be used by anybody and improved by anybody.
Searls concludes: "'Invention is the mother of necessity', Thorstein Veblen said. What we're doing with VRM is inventing protocols for buying and selling that will mother many new market necessities. One of those will be reforming CRM so it can respond to real customer demand, along with much better data than was ever before possible."
About Neil Davey
Neil Davey is the managing editor of MyCustomer. An experienced business journalist and editor, Neil has worked on a variety of newspapers, magazines and websites over the past 15 years, including Internet Works, CXO magazine and Business Management. He joined Sift Media in 2007.
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As a long term advocate of VRM (or SRM as I used to call it back in the last century) I fully agree with Doc and the ProjectVRM core principle of ‘user-driven’. However we at PAOGA prefer ‘user’ to ‘customer’ in this context as we provide secure VRM tools and services extending beyond the ‘Vendor Relationship’ to enhance individuals participation in their relationships as a citizen, patient, employee, client, student, et al. Let’s call it XRM.
Whilst Doc provides a number of examples whereby VRM can provide significant mutual benefits to both buyer and seller, I think there are a few more worthy of mention.
Trust matters. If you have any doubts about the significance of trust in relationships, or the murky depths to which it has sunk in recent times, then I would refer you to the book by Anthony Seldon – Trust* How we lost it and how to get it back (ISBN 978-1-84954-001-8). He quotes Henry Stimson (1867-1950), the US statesman as saying “The only way to make a man trustworthy is to trust him”. All relationships, whatever role we are playing, are enhanced by the appropriate level of trust and the principles of VRM, providing the reciprocal to CRM in our digital world, provides the necessary ‘two-way process’.
Because I’m worth it. No matter how high up the economic pyramid an organisation sits it is supported at the base by us as individuals. It is us who, through lack of trust, can bring down a government, cause a run on a bank, or desert a brand. As such it is simply good business to respect and trust your customer, employee, student, patient – and that includes protecting their personal information and relationship data. Trading in personal information without the owners’ permission is both illegal and unethical resulting in SPAM making up over 80% of internet traffic. The internet is too valuable and important to us all to abuse it this way and X-RM can fix this by providing the tools for individuals to manage and take responsibility for their personal information, wants and needs.
Is VRM Green? It could play a significant role as we, as individuals, become less wasteful and more conscious of the financial and environmental costs of unnecessary transportation. But that issue is for another blog.
Thanks for your additions, Graham. I'll be sure to investigate them.
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