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The customer is dead, long live the network!

Yvonne van de Wal and others TOTAL IDENTITY digital edition


Credits Based on an idea by: Hans P. Brandt Text and editing: Yvonne van de Wal Co-authors: Martin van Brakel (van Brakel Advies) and Jan Kranendonk (Kranendonk Robotics)


The customer is dead, long live the network! Yvonne van de Wal and others

2012 TOTAL IDENTITY Amsterdam


What led to this essay was an online discussion on customer focus and customer intimacy, initiated by Hans Brandt on the TSM Business School website. Martin van Brakel responded with his definition of customer intimacy. In his view, organisations have to deal with three developments. Leaders in organisations face questions such as ‘How do employees give substance to the meaning of inspiration in organisations?’ ‘How are we currently working on customer focus?’ and ‘How do we create long-lasting relationships?‘ Out of this discussion, two round table talks arose at Total Identity, during which the participants explored the topic of customer focus. Thanks to the diversity of the participants - various professional groups, and a lovely mix of digital natives and digital immigrants - the subject was discussed in great depth. The most important insights were: it pays to invest in relationships instead of transactions and it pays to steer the process instead of consumption. People in organisations need to be aware of the fact that they are part of a system. This leads to the challenge that customer-focused thinking and working requires organisations to act. So, the new customer focus starts with the culture of an organisation, the employees’ motives & intentions and exploring the structure of and interaction with the surroundings. We would like to thank all participants for their input and sharp insights. – Martin van Brakel, van Brakel Advies – Ivo Cerfontaine, Pink Roccade Healthcare – Souhail Haouari, Investors association (VEB) – Arjan Keunen, TSM Business School – Peter Kustermans, Boer & Croon – Kevin Looyschelder, Investors association (VEB) – Jeroen van Oostveen, Architectenweb & Materia – Ellen Roest, Boer & Croon


Prologue Scientists were ahead of us on the digital highway. I found that out 22 years ago when I was working as a temp at Elsevier Science Publishers. Scientists from all over the world used it to deliver their manuscripts. When I opened another big envelope, I thought African soil would fall out of it or that I could smell Indian spices. They were thick wads of typed paper which sometimes resembled parchment. However, the Eastern Europeans and Americans used to send emails. They arrived at the department’s central email address and it was always something of an important occasion. I was fortunate enough that when people went on holiday, I was allowed to read the messages and reply to them. The idea that I was in direct contact with people on the other side of the world was astonishing! An unusual sensation that occasionally comes over me is when I am in contact with ‘digital natives’, young people born after 1980 with a mouse in their hand. Whereas for me it was sensational to be able to communicate with people over the whole world, young people today have never done anything else and they do lots more besides. They renew, unite and connect and to them it’s all very easy matter of fact. The older generations, the ‘digital immigrants’, can learn a lot from them. Along with the arrival of ‘digital natives’ in business, there is another world on its way which, in a positive way, is without borders. Far beyond the industrial era, it is a world in which the customer calls the tune and organisations would do well to make online social networks part of their business strategy and experience what new customer focus means.

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The customer is dead, long live the network! The fundamental changes on the consumer side have made the road clear for another way of doing business. There is scarcely a place for traditional marketing communications any more. Network organisations with professionals who are linked to each other online are the ones who will make a difference in the near future. This essay offers a glimpse into how an organisation can operate in a really customer focused way again. In order to do so, organisations will have to make a radical change in which the customer becomes a part of the operation. The customer is dead, long live the network! What do you mean, the customer is dead? People looking for product information are inventive: they often use Google to get their bearings, or they use sources outside the company, such as social media, word-of-mouth advertising or customer reviews. Social networks like Facebook and Twitter are playing an increasingly greater role. This development is not in line with the way many companies and organisations are currently organised. They often still operate using a strategy, culture and processes that date back to the last century. In an environment that is becoming increasingly dominated by social media, traditional marketing techniques and sales alone will no longer work in the long run. The future belongs to organisations that use online social networks as a real part of their strategy. In his book ‘Connect!’1, author Menno Lanting sees that there is a two-way division between ‘digital natives’ and ‘digital immigrants’. The first group was born after 1980 and grew up in a digital world. The second group stems from the industrial era without internet. Organisations that use online social networks as a real part of their business strategy turn out to be above average ­‘digital native’: internet companies like Google together with media

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companies and young person brands belong to this group. These organisations already do naturally what their counterparts have yet to learn: they merge with the new ‘digitally connected world’. In his book ‘How customers think’2, Gerald Zaltman demonstrates that marketing specialists will have to change the way they work in order to better understand the customer . During market research, consumers say that they will buy a product; however, once the product is on the shelves, they don’t buy it. Zaltman concludes that consumers know exactly what they want to buy, but that marketing specialists don’t dig deep enough to find out what their actual motivation and reasons are. Large companies, where ‘digital immigrants’ form the majority now realise that their customers will raise their voices if they aren’t being heard. A typical example of this happened recently: during Giel Beelen’s morning radio show on 3FM, columnist Joep van Deudekom called for people to boycott KPN. Any customers who weren’t immediately helped by the KPN service desk had to say they were ‘friends of Joep van Deudekom’. He guaranteed that they would then receive proper service. The story was seized upon by Twitter and other social media. How did KPN react? It wouldn’t be the first brand to be sunk by widely backed criticism; remember for example Buckler beer an Youp van ‘t Hek. In his essay ‘The effect of social media’3Martijn Arts of Total Active Media writes: ‘Communication used to be considered a linear process resulting from one fixed opinion. This was possible because the use of communication instruments had been the prerogative of opinion leaders and professionals. Corporate communications presented a frozen image of the organisation. Employee statements have always contributed to the organisation’s reputation but because of

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social media, the influence and the impact become much greater. In the perception of the customer and the stakeholder, this bottom-up communication is inextricably connected with the company and is part of the total. Therefore the communication from the individual contributes to the corporate communication.’ In other words: KPN will have to make a radical change. It will have to get used to the digitally connected world. It will have to replace the distant, bureaucratic and expensive image with a more open, personal and authentic one. The radical change is only reserved for people of flesh and blood. That is to say, the KPN employees. In an environment where traditional marketing communication is losing more and more ground and where consumers rely far more on their own sources in order to gain (product) knowledge, there is a lot of speculation as to what will replace traditional marketing. What will marketing 3.0 and 4.0 look like? Will we still be talking about customers? Will the term actually fit in with the network’s ideas? Will customers become influencers, shareholders, entrepreneurs or co-makers? And what about organisations? Menno Lanting expects that half of the current top 10 popular employers among students - companies like Unilever, Shell, Heineken and Philips - will be replaced by other names...Just to give you an idea about customer focus. Marketing 1.0 and 2.0: from product to people-centered In the traditional customer approach - marketing 1.0 - the customer used to be bombarded with advertising campaigns with the expectation that sooner or later they would buy the product. Marketing 1.0 is offer driven: you can buy this product, dear potential customer (and you are crazy if you don’t).

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Marketing 2.0 is already (more) demand-focused; the marketing specialist engages in dialogue with the customer and in doing so tries to build trust and real contact. Wikipedia describes marketing 2.0 as follows: the central idea is that marketing should be more about dialogue with the customer. The suffix 2.0 refers to both the assumed succession of the traditional way of marketing companies (marketing 1.0) and to the use of Web 2.0 technologies, although the use of the term Marketing 2.0 doesn’t appear to be strictly dependent on the use of this web technology. Entering into dialogue and building up a relationship moves from composing a product together (co-creation) to thinking together about new products and services. The benefit of this to the organisation is that more customer information is obtained. This can be turned into a better offering so that distinguishing capacity is created. New insights can lead to a strengthening of the relationship with existing customers, an offering that better matches the customer’s needs and enables you to come into contact with potential customers. Marketing 3.0: from consumer to people-centered Just like ‘consumer oriented’ Marketing 2.0, Marketing 3.0 aims to satisfy the customer’s needs. However, companies that put Marketing 3.0 into practice have ambitious missions, visions and values: they want to make a contribution to a better world. Marketing 3.0 complements functional, emotional marketing with ‘marketing for the soul’. It subscribes to principles that include those of Stephen Covey4 that every person has a head, a heart, a soul and a philosophical core. The most important driving force behind the rise of Marketing 3.0 is the rapid development of mobile phones, Blackberry, iPhone, cheap c­ omputers,

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the emergence of social media such as Twitter, Facebook, ­YouTube and collaborative media like Wikipedia. These technological developments offer unprecedented possibilities for lightning-quick interaction between individuals and various target groups. Profitability is weighed against corporate social responsibility (CSR). The trick is to position a unique identity and reinforce it with authentic integrity in order to construct a strong corporate image. The best way to spread a unique mission is by talking about your trademark and, in particular, by involving consumers. Companies like Unilever, Procter & Gamble and Hewlett-Packard are trendsetters in the new world of Marketing 3.0: they have left Marketing 1.0 and 2.0 far behind. Coca Cola has also recently been converted: until a short time ago, their corporate website had a classical layout. Now it is filled with stories such as how Coca Cola’s vintage bottle got its shape and a lot of CSR (‘what Coca-Cola is going to do with its 50 million Facebook fans’). Visit www.coca-colacompany.com to see this typical Marketing 3.0 website. Marketing 4.0: holistic marketing The future will see holistic marketing within which all stakeholders are integrated. Marketing is developing into a true ecosystem in which relationship marketing, internal marketing, integrated marketing and corporate social responsibility play a part. At least that is what marketing founder Philip Kotler5 has already dubbed ‘Marketing 4.0’. So, what part will the customer play in this? Instead of acting as ambassador (so Marketing 3.0) they might become a shareholder, for instance in a company set up as a cooperative. Internet marketing specialist, ­Stephan

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Fellinger6 puts it nicely: ‘The core of the cooperative stands for 3 issues: togetherness, sharing and people, and it is no coincidence that these three characteristics are part of the internet’s DNA. The culture of organisations that are set up as cooperatives allows for a much greater chance of online success (e.g. Rabobank). The Financieel Dagblad recently wrote that organisations in which the employees are shareholders are scoring better, in terms of profitability, within the current economic climate. As such. it is possible not only to be a shareholder as an employee but as a customer too. I saw a great example of this in New York last year. REI is a Canadian outdoor gear brand which invites the customer to become a shareholder (www.rei.com). It was founded in 1938 when 23 friends started a cooperative because they weren’t happy with the outdoor gear that was on offer at the time. Now 4 million customers are shareholders who can spend their annual dividend on items from the store. When you walk through the store you can also witness REI’s social involvement. For example, there are nature courses for young people as well as programmes that help stop people getting overweight. At REI you can also become a Steward, which means you van sign up as a volunteer and take part in the running of the above projects. And don’t forget that a large section of shareholders and volunteers are fanatical brand ambassadors. What I also really like about the REI stores are the photos of staff members who share their love for their sport with the customer. This way, the customer knows at once who happens to be the in-store expert on a particular subject.... I understand, of course, that many brands will never be able to change the structure of their organisation into a cooperative. However, getting your customers to become shareholders in your brand is, from a marketing angle, very interesting.’

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P.S. Just to come back to Philip Kotler: he says that it’s suicide to direct all your marketing budgets into digital media. It is a both/and story with a good blend of classical advertising media which is still the cheapest way to reach the customer efficiently and social media which enable you to engage the consumers in dialogue and strengthen your links with them. Marketing flows 1.0 to 4.0 with associated core principles Product focus (1.0)

Consumer focus (2.0)

Person focus (3.0)

Holistic (4.0)

– Transaction – Customer – Paying – Quality – Company – Corporate – Sales – Product, product loyalty – Competition

– Value – Contacts – Influence (buying) – Access – Service – User – Influencer – Measurable – Customer Lifetime Value

– Network – Influence (earn money!) – Platform – Open system – Person, human – System loyalty

– Ecosystem – Connection – Independent from channels (stakeholder selects the channel) – Stakeholders are equal (each has their own role) – Interests are known and accepted – Open and transparent – Altruistic?

Hands on with marketing 3.0 Marketing 3.0 is ‘hot and happening’ and ‘digital natives’ are far from being in the majority in today’s companies. How can traditional organisations, which are mostly staffed by ‘digital immigrants’, adopt the principles of Marketing 3.0? Do you want to make a start on actually involving the customer (and other stakeholders such as your own employees, suppliers and shareholders) in your organisation?

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Be authentic Number 1: your company has to be itself An organisation can assume an image of sustainability but today’s critical consumers will soon see through that. People want to buy from an authentic organisation. They want to be associated with it and write a review or recommend it to others, talented people want to work there and suppliers jostle to do business with such a company. Good things come to those who do good things. Introduce ‘community marketing’ If somebody is considering making a major purchase like a TV, a new roof or eyelid correction, they ask friends and neighbours, the peer network – what they use and what their experiences are. Companies should ­position their social media efforts in such a way that potential buyers get the feeling that they are in contact with an extension of their peer network – people who provide trustworthy information and give advice based on their own experience with the product or service. Potential buyers then have the experience that they are buying within their local, physical surroundings. Have a look at www.zuberance.com: this company offers loyal customers a selection of social media platforms where they can leave a review or recommendation. The Zuberance platform ensures that reviews or ­recommendations end up on the right websites. The promoter’s network can learn at once from their experiences. Go and find the customer’s ‘influencers’ Many companies spend their budget on buying influence through online influencers with lots of followers. This contradicts the idea that, as a company, you have to be authentic. Certainly if only well-worn messages

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are spread via these influencers. This kind of communication will not be viewed as authentic and it will have a negative effect on the wider online distribution of the message that was hoped for. It is better to find and cultivate influencers who are already satisfied customers. By exceeding the customer’s expectations, a mutually beneficial relationship is born. Loyal customers will be prepared to act as promoters: they will publicise the company whether they are asked to or not. It is for this reason that you should give them something special to talk about. Involve them in the development of new products and services, like you would real VIPs. A company like www.klout.com concentrates entirely on charting ­people’s online influence. They do this by keeping track of which content people share online, how others interact with that content, how influential ­people are, how many followers they have (Twitter), how many friends and ‘likes’ they have (Facebook) etc. They claim that Klout has a total of 25 variables, subdivided into three categories: True Reach, Amplification Score and Network Score. The result is what they call a Klout Score, varying form 1 to 100. Peerindex, which was founded in 2009, also focuses all its attention on this particular area. The company has set itself the objective of identifying online influencers (‘authorities’) and scoring each one. It is interesting for companies to know how online influencers can be deployed in order to achieve certain goals. There is a very interesting short film about this called, ‘Influencers: how trends and creativity become contagious’, written and directed by Paul Rojanathara and Davis Johnson. See www.influencersfilm.com

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Involve loyal customers in the solution that the company is offering Customer who are influencers are keen to broaden their network, enhance their reputation and gain access to new information. Companies could make use of this by letting them be the first to profit from new research results so that they can show their followers that they are influential thinkers. A company could ask customers to join them in thinking up appealing solutions and then enlist their help in implementing them. There’s a good example of this in Florida where the number of young people starting smoking was becoming alarming. The state of Florida asked influential young people such as student leaders, athletes and cool kids who didn’t smoke or wanted to stop smoking to help them come up with a solution. Around 600 young people got together. They explained to the officials who also attended why their anti-smoking campaign wasn’t working. Outraged by the fact that cigarette companies were aiming their advertising campaigns specifically at getting youth to start smoking to replace older people who had died (often as a result of lung cancer), they set about devising a plan that would work. A group calling itself SWAT (Students Working Against Tobacco) then travelled through the entire state spreading their anti-smoking message. They succeeded too: in ten years, the number of young people smoking fell by 50%, despite a vicious counterattack by the tobacco lobby. Finally Companies whose most important business objective is customer focus deliver a consistently superior customer service and, as a consequence, they are able to count on higher profits. Research by John Fleming and Jim Asplund7 points out that customers who feel involved generate 1.7 times more sales than average customers. Companies whose ­employees

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and customers feel involved actually generate 3.4 times more sales than average. Moreover, there is proof that investors put their money in companies that have loyal customers and employees. In short: Customer focus is too important for a company simply to put in the hands of the marketing department, because marketing says nothing about the loyalty of employees or investors. Customer-focused thinking and working therefore has to be arranged at the highest strategic level. Whereas in the past the value of the customer was mainly expressed in monetary terms, the transactions that take place between organisation and customer (the network) are much more diverse. Moreover, there needn’t be transactions between all members of the network for it to be sustained. Financial transactions will continue to exist, but they come in various forms; for instance rent, lease, barter and freemiums. The transaction often has other components: payment in advance in order to gain access to a network. Hence the reason for this essay’s title: ‘The customer is dead, long live the network’. The customer no longer exists; they may still be a buyer, but they are also critic, ambassador, innovator, megaphone, shareholder and networker. In what capacity is the customer the most interesting to the organisation? As buyer of a bottle of Coca-Cola or as a Coca-Cola ambassador on Facebook? Listen to what Coca-Cola themselves say about this on their website: ‘We’re here because more than 1.8 billion times a day, every day, people express their love for our brands by purchasing one of our products. But those purchases represent more than just transactions. They’re emotional. We know because more than 50 million people have become our fans on Facebook, and millions of others have posted ­photos,

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videos and blog posts that demonstrate their passion for Coca-Cola. We’re here because our consumers allow us – and want us – to be here.’ www.klantgerichtheid.nl After all the talks about customer focus and the appearance of this essay, we would like to set up a ‘community of practice’ where you will be able to share your knowledge and practical experience with customer focus. For more information visit [www.klantgerichtheid.nl]. Goodbye!

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Reference list 1. Menno Lanting, ‘Connect! The impact of social networking on organisations and leadership. 2. Gerald Zaltman, ‘How customers think’. 3. Martijn Arts, ‘The effect of social media’: essay can be downloaded from www.totalidentity.nl. 4. If you would like to know more about the Stephen Covey’s influential work, then read ‘The Seven Habits of Highly Effective People’. 5. Dutch marketing professors chose Philip Kotler’s book, ‘Marketing Management’, as the most influential marketing book of all time. 6. If you would like to read the complete column ‘Het jaar van de coöperatie’ (the year of the cooperative) by Stephan Fellinger, go to: fellinger.nl/2012/10/01/het-jaar-van-de-cooperatie 7. John H. Fleming and Jim Asplund, ‘Human Sigma: Managing the Employee-Customer Encounter’. If you have any time left Read the little book ‘Think Small, Grow Big’ by Ab Kuijer (it’ll only take an evening). It is aimed at the modern day marketer who can no longer see the wood for the trees. Using concrete examples and five-step plan for setting up a social media strategy, the book answers the question how to get your message effectively across to your target group these days.

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The customer is dead,long live the network!