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What does Web 2.0 mean for your business?

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10th Jan 2008
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Best Customer Service and Experience Feature 2008

A growing number of consumers are using the internet to shape and inform their purchasing decisions. So what effect is this is having on CRM, how can companies navigate the ‘Web 2.0-enabled’ world and gain a competitive advantage in so doing?

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By James Paterson, Plebble.com

You have probably noticed from a recent deluge of media coverage of websites such as YouTube, Facebook and MySpace that the internet has changed: users are no longer simply downloading static data and content as they tended to do previously. Many are now also uploading and sharing data/content among themselves. This has led to a proliferation of ‘social media’ websites, social networks and other user-generated content sites. This phenomenon has been called, in some circles, ‘Web 2.0’ – in other words the latest iteration of the internet.

Many (internet pioneer Tim Berners-Lee included) regard this term as a misnomer – the internet was not originally created to sell things like holidays, CDs or toasters (as it may have appeared to have done during the dot-com bubble of 1997 to 2001 – ie ‘Web 1.0’) or even to serve up corporate messages and advertising as many companies use it today. Rather, the internet started life as a peer-to-peer communication tool - to exchange (mainly scientific) data among a number of users simultaneously (so-called ‘many-to-many communication’), allowing them to collaborate and share information easily across their whole community.

What is happening on the internet today, therefore, is simply a return (albeit on much a larger scale) to what it was originally designed to do – share data, information and media. So, what does this new (or return to the old) internet mean for your customers and what can you do about it?

How consumers are using the internet

According to the Office of National Statistics, 31.8 million UK consumers over the age of 16 are now online – representing nearly 70 percent of the UK’s adult population. More and more of those people are participating in ‘Web 2.0’ technologies such as blogs, social networks, information aggregators and peer-to-peer reviews. It is estimated, for example, that in April 2007 there were 70 million blogs worldwide with around 84 new blogs and 1,020 new posts being created every minute. In August 2007, there were 10.7 million registered users of Bebo in the UK, 10.1 million users of MySpace, and 7.1 million users of Facebook. This number is growing all the time.

photo of James Paterson, Plebble.comThe internet started life as a peer-to-peer communication tool - to exchange data among a number of users simultaneously, allowing them to collaborate and share information easily across their whole community. What is happening on the internet today, therefore, is simply a return to what it was originally designed to do.

James Paterson, Plebble.com

According to traffic-rankings website Alexa.com, Facebook is the currently second most visited site in the UK, after Google. YouTube is the UK’s sixth most popular site, Ebay seventh, MySpace ninth, Bebo tenth and Wikipedia eleventh.

Price comparison sites such as Kelkoo, Google Product Search, MoneySupermarket.com and Uswitch are also achieving increasing prominence. These aggregate prices offered by different retailers or service-providers so that users can find in one place the best price for a product or service they are looking for – and very often buy it there and then.

There are also a growing number of websites (eg Reevoo, TripAdvisor and LondonEating) that encourage users to review different products or services such as electrical goods, hotels and restaurants. The purchasing decisions of other users are then informed by peer reviews, not by the more traditional routes of the retailer or manufacturer concerned or the media. In a recent study by Forrester Research, over 60 percent of those polled said that they would trust a consumer opinion posted online.

This is in contrast with advertisements and product placements that were only trusted by 25 percent. In another recent survey, this time conducted by Ipsos, only 8 percent said that they would trust a review of a product or service posted on a company’s own website. More surprisingly, only two percent said that they would trust information about a product or service written by a company’s chief executive. According to the same survey, an estimated 9.7 million people in the UK have bought a product or service directly because of comments posted on the internet by other consumers.

This is the thin end of the wedge. Websites allowing people to process, analyse and make sense of what would previously be regarded as ‘information overload’ are becoming increasingly prevalent as the concept of user-generated content or rather user-provided information is taken further. Data/information is continually collected and presented to give internet users a real time view of whatever it is they are interested in.

Prospering in a ‘Web 2.0-enabled’ world

A common feature of the above technologies is that, for the first time, the dynamic between businesses and consumers is changing from a predominantly vertical communication model (ie consumers getting their information from companies, advertising, the media, etc) to a predominantly horizontal one (ie consumers getting their information from each other).

This means that the relationship between businesses and their customers is changing. ProjectVRM, a concept initiated by respected fellow of Harvard University's Berkman Center for Internet and Society, Doc Searls, amply illustrates this point. VRM, or vendor relationship management, is the coin-side of CRM. In other words, customers are increasingly finding ways of managing the people that sell to them. Who delivers on time? Who offers the best deals? Who’s got the best CSR? Many of the technologies referred to in this article fall precisely into this space whether from a B2B or B2C perspective.

This changes the rules of the game and, as such, has a specific impact on the CRM strategies that should be adopted by companies. So, how can you navigate this new, ‘Web 2.0-enabled’ world? More to the point, how can you prosper in so doing?

For the first time, the dynamic between businesses and consumers is changing from a predominantly vertical communication model (ie consumers getting their information from companies, advertising, the media, etc) to a predominantly horizontal one (ie consumers getting their information from each other).

As above, the rules of the game have changed but the new rules are not ‘anti-business’. They are simply different. If you play by these rules, you can prosper. How? This could be the subject for a whole separate article. As a starter, however, I would borrow six of the nine principles outlined by Allegiance in its recent white paper, 'The Top 9 Ways to Increase Your Customer Loyalty' – give customers what they expect, turn complaints into opportunities, engage customers in a two-way dialogue, survey customers and solicit their feedback, tie customer loyalty and engagement to outcomes, and use analysis to predict loyalty and intent. The difference, though, is that (however daunting you may find this) you should put these principles into effect in a public forum, not behind the closed doors of an internal CRM system.

Dell Computers found this out first-hand when it launched its Dell2Dell blog ('a Blog about Dell Products, Services, and Customers') in July 2006 to deal with increasingly publicised complaints about its poor customer service. Participating in the discussion and dialoguing publicly with its customers on a human level through its blog, Dell has dramatically improved its reputation and customer loyalty.

The concept of the ‘superfan’ or ‘netpromoter’ is widely being talked about in marketing circles at the moment. This is considered by many to be the holy grail of online marketing – creating a network of customers who are so positive about your brand that en masse they do much of your marketing and sales for you – for free.

Companies can connect with and recruit superfans simply by participating in ‘Web 2.0’ technologies on an equal (ie horizontal) footing. A good example of this is Apple – you only need to read blogs such as CultofMac.com and TheAppleBlog.com to realise how it has harnessed the immense power of these technologies to create one of the most successful brands of our generation.

Some predictions...

As to the future, there will inevitably be a growing adoption/use of 'Web 2.0' technologies by businesses. This is supported by a recent McKinsey Global Business Survey in which nearly 75 percent of the executives polled said that they planned to maintain or increase investments in ‘Web 2.0’ technologies in the coming years. Aligned to that will be a growing acceptance (indeed expectation) by consumers that businesses will communicate with them via these technologies.

Developments in the technologies themselves as well as a reduction in costs will mean that ever larger amounts of data/information will be available to consumers in increasingly easier-to-digest formats. This is likely to lead to unprecedented levels of transparency of dealings between businesses and their customers, making the horizontal communication model even more prevalent.

In the end, the businesses that will prosper in this ‘Web 2.0’ world will be those that are able and prepared to adopt its principles, communicating with their customers no longer on a vertical basis but seated side-by-side next to them.

James Paterson is co-founder of Plebble.com.

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By ChrisWinstanley
22nd Jan 2008 11:17

James,

A great article and I was particularly interested in the Forrester research about trust in customer opinion vs. advertising. We commissioned YouGov to carry out very similar research in the UK in October 2007 and they found that online reviews of products influenced 60% of consumers - compared to 12% for advertising. It's quite something, given the relative infancy of customer reviews, that research is telling us it is 5 times more influential than advertising.

Another interesting point for me is the issue of User Generated Content being manipulated for marketing purposes. Today, this is taking a risk with the retailer/manufacturer brand and the trust that consumers place in it. In the near future, it could mean falling foul of new legislation, depending what the Government's response is to the new 'Unfair commercial practices directive'. The directive is likely to make it unlawful for retailers to display customer comment unless they can demonstrate that it is genuine.

The research that we commissioned also asked whether consumers wanted regulation of customer reviews (80% do) or a kitemark to show that they are genuine (82% would); something we at Reevoo support in principle, albeit complex to develop a regulatory structure. Interested parties can access all the research at www.reevoo.com/press

Regards

Chris
Marketing, Reevoo

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By updown1234
04th Feb 2008 13:36

Thanks for your comment, Chris.

I agree. 'Fake' UGC is the potential achilles heel of our industry. There have been several high profile examples of businesses being caught out by posting fake content (eg the couple blogging about travelling round America staying in Walmart car parks - which turned out to have been organised by Walmart's PR company) and being slammed for it. I also agree that brands that engage in that sort of activity are taking big risks with their reputations.

As to the question of whether to legislate against it, I think that may be somewhat heavy-handed at this stage. As you know and your research no doubt backs up, trust is probably the most important component of any peer-to-peer review system. However, it should be up to the provider of that review system (be it Reevoo, Plebble, TripAdvisor, or whomever) to create that trust through their own security and data-checking systems. I would be worried that legislation might, in some senses, allow us to opt out of this responsibility.

Regards
James
Plebble.com

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By mdavis
15th Jan 2008 05:28

James,

As a veteran of the CRM phase of customer "technology", I agree that CEO's will fall headlong into investing in the 'machinery' of Web 2.0, as they did with CRM. And many of them will fail... because they won't buy into the mentality of dealing openly and honestly with customers. Web 2.0 success will come from a philosophy and approach that values the customer's intelligence and engages them to provide the insight that only they can. But it will have to be honestly sought by companies, and, more importantly, assuming the customers provide the insights, someone will actually have to do something with it.

Having used deep CRM insight into customer value, purchase frequency, product mix, etc. to design and pilot customer programs that exceeded targets by over 200% (yet never got rolled out), the biggest problem is overcoming status quo, silos and outmoded attitudes that still believe corporations can "manage" customers.

Fold into the mix the tipping point of media spend moving to online and search, where success is ENTIRELY determined by consumer relevance, and executives better understand fast that more technology spend alone won't come close to getting it done. They need to change their attitude and their approach. "The voice of the customer" is no longer enough... they need the whole customer; inside the tent! And they need to actually 'action' what they learn.

Michael Davis
Rhino Marketing Inc.

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