Posts Tagged ‘Small Business’

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The Supreme Court Punts on Business Method Patents

by Ron on Tuesday, June 29th, 2010

You may not know it, but the co-founders of Zavee have a background as practicing lawyers. That fact is usually enough to keep us from blogging about legal topics on Zavee Thinking, but one of the end-of-term Supreme Court decisions issued yesterday is both interesting and important to small businesses: a patent case called Bilski v. Kappos.

via Cliff1066 Creative Commons

Thomas Jefferson

The Court doesn’t handle patent cases very often, both because the legal issues rarely become Supreme-worthy and because the underlying facts are often very technical. Bilski is an exception on both counts, as the issue is extremely important and the facts aren’t very difficult.

Bilski filed for what is called a “business method” patent, in this case a procedure for instructing buyers and sellers how to hedge against the risk of price fluctuations in the energy sector. The patent application was originally denied because the Appeals Court held that a “process” was patent-eligible only if it either was tied to a particular machine or apparatus or physically transformed a particular article into a different state or thing (think of a process for cutting a diamond or desalinating seawater). This is called the “machine or transformation” test and it played a central role in the Bilsky decision.

No one can patent natural phenomena, laws of nature or (and this is critical) abstract ideas. In fact, the Supreme Court held that the Bilski patent was properly denied not because it failed the “machine or transformation” test – the Court rejected that as a litmus test for process patents – but because it was an abstract idea. The problem for business people is that the Court explicitly refused to define what kinds of business methods could both fail the “machine or transformation” test and pass the “abstract ideas” test – and thus be patent-eligible.

Why is this a big deal? The purpose of patent law (which was pioneered by Thomas Jefferson) is to encourage innovation by granting inventors who disclose their invention a monopoly over the subject of the patent. Some inventors don’t like that bargain: the formula for Coca-Cola has never been patented because its owners think disclosure is too risky – they worry that flavor chemists could reverse-engineer the formula and come up with something that tastes like almost like Coke but doesn’t violate the patent.

With business method patents the risk is the opposite: that despite disclosure businesses could inadvertently infringe on a patent just by conducting their business. Although the patent described in this famous Onion article would never be upheld, Congress was nervous enough about business method patents that in 1999 it enacted a specific defense against certain infringement claims relating to business methods. Even with this defense, however, businesses will have to choose between investing in resources to effectively monitor both new patents and their own business to prevent infringement or take the risk of possible litigation. Either choice is risky and potentially very expensive.

The fundamental question about business method patents is whether they help or hinder innovation. Another way to ask the question is whether the absence of patent protection would deter inventors from incurring the cost and risk of invention. In science and technology, the benefits of patents are clear: no one would invest in drug discovery if the results of their efforts immediately had to be shared – for free – with drug companies that hadn’t put any time or money into the research. On the other hand, methods of doing business have been competing in the marketplace for centuries without patent protection.

Using a similar analysis, four of the nine Justices concluded that business methods should not be patent-eligible, but they were outvoted (all nine agreed that the Bilski patent was too abstract to be eligible). The Court’s opinion has received critical reviews, since it was so narrowly decided that it leaves the important questions unanswered. Yet it seems inevitable that the Court will have to grapple with the issue of business method patents before too long. The lines are blurring between technology that is clearly patent-eligible and abstractions that clearly are not – a factor, perhaps, in the Court’s non-decision – and the risk to both businesses and inventors is great.

The Zavee takeaway:

  • Whether methods of doing business are patentable is an important question, one the Supreme Court should have answered yesterday.
  • If you are developing a novel way to do business, think twice before investing in a patent. Bilski didn’t kill the business method patent but it didn’t offer a strong endorsement, either.
  • It’s not impossible that someday you will be on the receiving end of an infringement claim. If it happens, find the best patent lawyer you can and don’t give up hope – you may be able to beat the claim or even the patent itself.

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Checking Out Checking In

by Ron on Tuesday, May 4th, 2010

Have you checked in yet?

Foursquare @SXSW

Foursquare @SXSW

Location-based social networks such as Foursquare and Gowalla make use of the GPS capabilities of smartphones to let users communicate in real time not just what they are doing, as with Twitter, but where they are. They are growing rapidly, and for businesses they are well worth checking out.

Both networks are about two years old but have entered the mainstream only recently. Users of Foursquare “check in” at different locations to tell their friends where they are and what they are doing. Foursquare also has an element of game play that lets users collect “badges” for certain activities, such as earning a “barista” badge for checking into five Starbucks. Foursquare has a large user base that skews young and lives in cities, and has attracted a certain amount of backlash (note: strong language at link), although it has its defenders. Gowalla doesn’t depend quite as much on its game mechanics, but supports media files, such as photos, and claims to be looking for a broader (and perhaps older) demographic.

Businesses seem to have less of a “wait and see” attitude toward location-based social networks than they did toward Facebook and Twitter. It may be that, having been through this before with other Social Media outlets they simply need less persuading when it comes to location-based networks. It may also be that the business case for location-based networks is more obvious than with, say, Twitter. Another possibility is that the networks themselves have become business-friendly faster. Foursquare already has the ability to serve merchant offers based on location, although it is still refining its analytics dashboard. In any event, marketers are not sitting on the sidelines. Recently, Pepsico announced a “geo-based loyalty program” in partnership with Foursquare that will reward consumers who check in via iPhone at businesses that serve Pepsi products. The History Channel also is using Foursquare to promote its show, “America, The Story of Us.”

Do networks like Foursquare and Gowalla have relevance for small businesses? We think they do. Even basic data on who has visited a business, how frequently, etc. adds to the merchant’s knowledge of the customer base. Serving offers and other content to those customers has obvious benefits, although it still isn’t clear how the merchant can get a full picture of the return on investment from that content (merchants will know how many people used (and, presumably, saw) the offer, but won’t necessarily know how many of those transactions were made by customers who would have purchased anyway). Checking in to a business from a location-based network also can provide extended word of mouth for the merchant. It’s going to take time to figure out how to use these services for business, but that was true with Facebook and Twitter. And, as with Facebook and Twitter, there is a lot of potential and no real downside for businesses that experiment.

At Zavee we are currently exploring the fit with location-based networks, but we fully anticipate using this technology to add value to the Zavee experience for both merchants and shoppers. With both cash back offers by merchants and reviews by shoppers, Zavee provides a great deal of content whose value can only be enhanced by becoming location-aware.

The Zavee takeaway:

  • You heard it about Facebook, you heard it about Twitter. Well, location-based social networks aren’t fads either.
  • Businesses have wised up and caught up, and are right on the heels of consumers in discovering how to make these services useful, relevant and rewarding.
  • If you were sitting on the sidelines while Facebook and Twitter were becoming huge, don’t let it happen again!

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Twitter for Local Businesses

by Ron on Tuesday, April 27th, 2010

When I speak with local merchants about Social Media, I find that they have surprisingly similar levels of awareness, interest and understanding: Almost everyone is familiar with Facebook and YouTube, although they don’t always see the business opportunities, and very few seem to have even heard of LinkedIn. In between is Twitter, which many merchants seem to have heard of but not that many seem to be interested in. The comment I’ve gotten from more than one local merchant is, “I don’t have time for everything and I have to draw the line somewhere.”

The Greater Delray Beach (FL) Chamber of Commerce has been kind enough to ask me to speak about how businesses can use Twitter – and why they should. My presentation, which is part of a “Tech Talk and Coffee” about Social Media for Business, is scheduled for Tuesday, May 18 at 7:30am. Other speakers will cover Facebook, YouTube and LinkedIn. The session is open to the public as well as to Chamber members and every local business should find it useful, even businesses that haven’t considered adding Social Media to their marketing mix.

By now most people have heard of Twitter. Oprah uses it. So does the White House. It’s a free micro-blogging service that lets users publish short notes (called “tweets”) of up to 140 characters in real time. There are smartphone applications for Twitter, so it is a fully mobile service. Users can “follow” other users and see their tweets in their Twitter stream. Following and being followed is how users build a community on Twitter. Users also can search by keywords or topics to find relevant tweets. Users can reply to tweets, forward (“retweet”) them, and include links to web sites or other media. Engaging in these conversations is a good way to attract followers.

Broadly speaking, there are at least four ways businesses can use Twitter.

Listening Post. Twitter’s most significant benefit to business is its immediacy. When US Airways Flight 1549 landed in the Hudson River in January 2009 there were posts, including photos, on Twitter within minutes. If you want to know what your customers, competitors, vendors, etc. are thinking right now, Twitter is a great way to find out. Listening on Twitter is also a great source of ideas and information. Using Twitter’s search functions can widen any business’ horizons.

Brand Builder. Tweeting regularly with timely, relevant information creates interest in you and your brand. This works best when most of the tweets are on a subject that relates to your business but does not overtly promote the business itself. For example, if your restaurant wants to be known for its fresh produce, you could tweet about sustainable farming, its local purveyors, and even the weather. You will attract followers on Twitter who might become customers themselves or retweet your posts to others. Media outlets have become big Twitter users and you could find your restaurant covered in the newspaper just by using Twitter adeptly.

Lead Generator. Twitter lets users form, and join, communities. Twitter’s search functions make it easy to identify other users with similar interests or in similar businesses. Mutual following puts a business’ tweets in its followers’ streams and vice versa. You can get leads from Twitter communities built on common interests both by reading relevant tweets and simply by asking for help.

Help Desk. Twitter is an outstanding platform for providing customer service. Responding in near real time to a tweet that asks for assistance – or jumping in to solve a problem you see on a tweet from a customer even if it isn’t directed to you – not only helps your customer, it helps cement (or improve) your reputation as a business that cares about its customers. One of the earliest business adopters of Twitter was Comcast, a company not known for the quality of its customer service. Comcast now has a full-time staff that monitors Twitter for customer complaints and responds almost immediately. When you ask your customers to follow you on Twitter you are not just gaining access to them, you are providing access to yourself. Since all of your followers will see these interactions the potential benefits of using Twitter to help your customers quickly are huge.

At Zavee we try to use Twitter for all of these functions, and we continue to learn as we go. Here are a few suggestions for getting started with Twitter:

  • If you don’t feel comfortable putting your business name out there right away, start with a personal Twitter account.
  • Listen first, then start asking questions, make suggestions, and in no time you will be part of the action.
  • Pass along stuff, including links and retweets, that’s timely, relevant and interesting, but don’t overdo it. Original material is more useful and will result in more followers.
  • Most important of all, be yourself.

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The Boutique Mentality

by Ron on Tuesday, April 6th, 2010

They aren’t always quick to see it, but local merchants have some built-in advantages over national chains and big-box retailers. There’s no denying that local merchants find it hard to compete on price. But consumers don’t care only about price: they care about service, too, and that’s a real opportunity for local merchants.

A recent survey found that women increasingly are shopping for clothing online. How does that news help local merchants? A whopping 84 percent of those who reported taking their business away from bricks and mortar stores did so because of poor customer service. And customer service is where local merchants have an advantage over larger competitors. Owners and managers of local businesses usually are closer to the customer, and are often the first to hear about issues or concerns. They have the ability to react to customer needs and even break (or change) the rules if circumstance dictate.

Chanel Boutique on Wicklow Street (via chacrebleu)

One thing local merchants can do to exploit their natural advantages is to adopt a “boutique” mentality. One big difference between boutiques and other stores is their focus on providing a unique, personalized experience, not just selling a product. Customers often respond favorably to that experience, not just by paying extra for it once, but by becoming loyal customers and by sharing their experiences with their social circle. The combination of premium pricing, repeat business and word of mouth is exactly what local businesses want to achieve.
The boutique mentality isn’t limited to retail. There are boutique hotels, boutique wineries, even boutique auto mechanics – a really good one services my race car. Most boutiques are small, but they are defined by service, not size. A small retailer that doesn’t provide a unique experience to every customer isn’t a boutique; it’s just small.

Part of the boutique experience is the sense that the relationship with the customer doesn’t end with the sale. Whether it’s as simple as a follow-up phone call or as elaborate as a series of surprise gifts, boutiques understand that continuing to engage after the sale helps create customers who are not just loyal, but vocal.

The best boutiques thrive on data. Knowing and catering to customer preferences is the hallmark of the successful boutique, especially boutique hotels. But hotels aren’t the only boutiques that have access to data about their customers. With tools like Zavee, almost any business can learn who their best customers are, how much they spend and how frequently.

It may take some effort to fit the boutique mentality into a business that doesn’t already have it. It certainly takes commitment to make it work, because it requires a focus on the customer that isn’t second nature for every merchant. And it sometimes requires some investment, especially for businesses that are new to managing customer data. But it may be just what a merchant needs to compete in difficult times.

The Zavee takeaway:

  • A business that wants to charge more, generate repeat business and earn referrals from vocally loyal customers should think and act like a boutique.
  • Boutiques are customer-focused before, during and after the sale, and rely on data to understand customer preferences.
  • The boutique mentality can be applied to businesses in virtually every category; it just takes commitment and creativity.

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Zavee’s First Featured Merchants

by Ron on Tuesday, March 2nd, 2010

It doesn’t seem very long ago that Zavee existed solely in our developer’s test environment. But we have been up and running for a while now, working out the inevitable kinks and fixing the kinds of “what were we thinking?” mistakes that customers can spot in a heartbeat.

One of the things that is working well is our merchant search capability. Every Zavee user – merchant, shopper and cause – is precisely geo-located, so Zavee can center a search on a specific shopper and display the merchants within a true radius. This capability lets us do a lot of interesting things. One thing we can do is promote merchants to shoppers based on distance.

Our new “Featured Merchants” capability, which we are introducing this week, highlights specific merchants for a week at a time. However, to keep relevance and interest high, shoppers will see only those Featured Merchants within the radius they specify. In other words, shoppers in Fort Lauderdale will see a different list of Featured Merchants than shoppers in West Palm Beach.

This week’s crop of Featured Merchants provides a wonderful cross-section of the forward-thinking merchants who have joined Zavee:

Minuteman Press in Boca Raton is a full color commercial printing house that can produce a wide variety of printed materials, from brochures and catalogs to corporate letterhead and business cards to signs and banners. Minuteman is one of the few South Florida printers with the expertise to operate the world-renowned Heidelberg line of full-color presses.

Custom Vision Care in West Boca specializes in the most advanced techniques and technologies create a customized visual rehabilitation program for every patient. Above and beyond conventional lenses and treatments, Dr. Marotte and his staff maximize patients’ visual efficiency, visual comfort and safety. Visit Dr. Marrotte for a personal eye exam and visual needs consultation.

Ultra Cleaners Pointe at Wellington Green is the west county location of one of South Florida’s premier dry cleaners. Ultra Cleaners is continually improving its processes, investing in new state-of-the art equipment, and constantly recruiting skilled employees. Not near Wellington? Search on Zavee to locate Ultra’s other convenient locations.

Jimmy’s Bistro is one of the best-kept secrets in Delray’s exciting restaurant scene – but it won’t be a secret for long. The owner, Jimmy, has a resume that would be the envy of any chef in Palm Beach, Fort Lauderdale or Miami. Jimmy worked in New York for 10 years at world-class restaurants such as Aureole and Le Chantilly. He also is one of the few American chefs in South Florida who worked for a year and a half at some of leading restaurants in Paris, including famed brasserie Zephyr and trendy bistro La Robe et le Palais.

Coral Springs Flowers & Events has supplied flowers and floral arrangements for some of the area’s most elegant events. With an outstanding reputation for the freshest products and the most creative concepts, Corals Springs Flowers & Events should be at the top of the list for everyone who is looking for a high-end floral solution.

Coral Springs-based David Seidner, P.T., D.C. says, “You’re in pain, I can help.” As the only dual-licensed doctor in all of South Florida with professional medical expertise as both a Physical Therapist as well as Chiropractic physician he can assure you that you will receive extraordinary treatment and care supported by the most advanced equipment and technology.

Located in North Lauderdale, A.S.E. Car Care Specialists is a complete auto repair facility. A.S.E. technicians can handle not just the usual tire repairs and oil changes but are fully qualified to perform complete engine rebuilding and electrical rewiring and repair. Wonder where the “A.S.E.” name comes from? Every one of their mechanics is certified by the prestigious National Institute for Automotive Service Excellence.

From fires to floods, ServiceMaster Clean by Robinson is Broward County’s disaster recovery specialist. Based in Fort Lauderdale but willing to travel anywhere, ServiceMaster Clean operates 24 hours a day, 365 days a year to insure timely disaster restoration response to restore your home or get your business back in business!

Watch for more new features and capabilities coming soon!

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NBC, NYT and Loyalty

by Ron on Tuesday, January 19th, 2010

In the course of an entertaining post about NBC’s current “two hosts, one spot” late-night nightmare, Dean Bairaktaris asks, “Where is everyone’s Brand Loyalty? Is it with NBC, Leno or Conan?” This is an insightful question, because the expensive and embarrassing contretemps has been presented largely as Jay vs. Conan, Old Guard vs. Young Turk, homespun vs. hip.

via mashable.com

via mashable.com

The potential impact on NBC as a major media channel has largely been ignored, except in posts like Dean’s, as Conan is widely presumed to be able to shift his audience, more or less intact, to Fox or another media outlet. But it’s fair to ask whether the broadcast networks actually have brand equity apart from the shows they carry. Is there an “NBC-ness” to the Tonight Show (or any other NBC program) that would not carry over to another network? That arbiter of absurdity, The Onion, would certainly say no.

The soon-to-be-announced decision by The New York Times to put some or all of its content behind a pay wall also involved a debate over the brand equity of the Times versus that of its content (in this case, the paper’s prominent columnists). An outstanding article in New York Magazine details some columnists’ concerns that in its pursuit of subscription revenue the Times would be sacrificing its position as a leading online news brand, giving up both traffic and influence (as well as premium advertising rates, apparently).

I think the two situations have a lot in common. In both cases, the underlying question was whether the locus of customer loyalty is the channel (NBC and NYT) or its content (shows and columnists). I’m not sure the answer is the same in every case. I don’t think broadcast TV networks are differentiated enough to generate brand loyalty, but I’m not sure that’s equally true of newspapers (I grew up reading the New York Times so I might be biased – or just conditioned).

For small businesses, the lesson is to think about what aspect of your brand your customers are loyal to, and not to assume that all customers are loyal to the same thing or for the same reason. You want the locus of loyalty to be your overall brand so that customers will stay with you as your business changes, whether those changes involve staffing, product assortment, location or even store closings. However, until you have the conversation with your customers, you can’t be sure that they are loyal to your brand or to your personable store manager, convenient location or frequent sales.

As a smaller business, you have the ability to engage with customers directly and provide an overall customer experience that embodies your brand’s unique promises and values. Larger brands often (but not always) provide a product experience that is not as closely connected to the brand. This is an advantage for smaller businesses which, unlike large brands, should never need to market brands and products separately. To leverage the direct connection with customers, treat loyalty as a two-way street. There are many ways to demonstrate your loyalty to customers, but the easiest is to listen to what they have to say.

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New Years Resolutions – And Lies

by Ron on Tuesday, January 5th, 2010

What would the first week in January be without a post about New Years resolutions?  Mine aren’t of the “get to the gym” variety. Instead, my plan for 2010 is to use the web – especially Social Media – more effectively.

In part this means learning to avoid what Penelope Trunk calls The 4 Lies About Social Media. (In her post these are more “myths” or “mistakes” than lies. I don’t know why she calls them lies but being provocative is a good way to get noticed. It helps your Google page rank, too. Hence the title of this post, which originally was just “New Years Resolutions” – and another resolution: to get better at writing for search engines.)

In my quest to improve my social media skills this year I am very fortunate to be surrounded by a team of well connected and highly creative colleagues. I want to make it clear that my skills (and deficits) are my own; Zavee, collectively, is poised for the leadership you expect of us. Another way of putting it is, my real New Years resolution is to become as smart as my staff! With that caveat in mind, here are some of my Web-related resolutions for 2010:

  1. Take better advantage of Linkedin. Penelope says that Linkedin is a great scorecard for the size of one’s network but it’s a “lie” to say that it’s useful for building a network. The scorecard aspect is useful (e.g., for employers who want to learn about how connected a job candidate is).  However, Linkedin is not for conversations, so it is not a good way to build a network. I see her point about conversations – it may be the only thing you can’t do on Linkedin. On the other hand, Linkedin provides many opportunities to get found, get noticed and get followed. Unfortunately, I haven’t really figured out how to use Linkedin efficiently and proactively – how best to use features such as starting discussions and asking questions. Fortunately, my marketing people don’t have that problem. So my personal resolution is to follow their guidance so I can understand Linkedin better and use it more effectively.
    2. Stuart Pilbrow via Flickr

    Happy New Year!

  2. Build our brand with Twitter. Penelope says that networks require conversations but it’s a “lie” that Twitter is the place to have them. She says Twitter is better for finding and following people with similar ideas and interests. We do use Twitter to keep up with tweets about Social Media, loyalty marketing and other topics that interest us, and tools such as TweetDeck and HootSuite make it easy to manage different accounts, searches and lists. However, I know that I have a lot to learn about creating a presence on Twitter and achieving the kind of scale that will enable us to use Twitter to leverage the Zavee brand. Fortunately, our community manager has a great deal of experience with Twitter. My New Years resolution is to learn from her how to build a brand with Twitter.
  3. Make Zavee Thinking more relevant. Penelope says that blogs are networking tools, not personal journals, and I certainly agree. I think I’ve been disciplined in how and what we write about on this blog.  I write from the small business perspective, whether I am posting about trends and concepts or about tools and techniques. For 2010, however, I intend to focus a bit more on practical solutions for merchants, including by posting about how merchants can get the most out of Zavee. Even this post, which is superficially about me, is really about how I can better be the “lead blocker” for merchants who are trying to make progress with unfamiliar tools and concepts.
  4. Use our Facebook fan page to help build our member community. Penelope’s fourth “lie” is that social media is no place for business. In fact, businesses are finding new and interesting ways to use social media all the time, and social media channels are constantly developing business-oriented tools and features. One example is Facebook’s fan page. We have one, and we want it to be the destination for our Zavee community. One way to do this is to use Facebook to extend the content we can deliver on the Zavee site. Facebook is great for managing events and user-generated content, both of which are important to us.  We will have more to say over the next few months about our member community and how Facebook fits into our strategy. For now, we’ll just say that our final resolution for 2010 is to build our community as we build our business, which includes being smart about Facebook.

See? Nothing too difficult there! Maybe I have time to hit the gym.

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2010: The Year of Social Shopping

by Ron on Tuesday, December 29th, 2009

As we come to the end of a most unusual year I’d like to provide an update on Zavee’s progress, as well as offer some additional thoughts.

Our most important news is that Zavee is almost ready to go live. We are finalizing the launch release of our software and expect to begin processing transactions by mid-January. We began our merchant sales efforts in November and already have signed up scores of local businesses in our South Florida launch market. Our consumer acquisition program will begin in January and ramp up over the next several months.

Shopping with Friends

Shopping, Socially

One of the most gratifying – and, frankly, amazing – things about the process of creating Zavee is the extent to which people who know what they’re talking about are saying the same things we are about Zavee’s core concepts. In short, Zavee is in the right place at the right time.

When we describe Zavee as a “social shopping” platform we recognize that this is a new concept for most consumers and businesses. Social media marketers, however, say that social shopping is poised for growth:

“Social shopping is really still in its infancy,” said Andy Lloyd, CEO at Fluid, an e-commerce technology company. This means retailers and solution providers are still thinking about how people connect with other people around buying decisions in an online environment and how they can facilitate those gatherings. “The challenge is people don’t know what social shopping is or what it does,” Lloyd continued, which is why the adoption rate isn’t very high yet.

Search professionals have been quick to see the advantages of social shopping for merchants, including advantages we discuss with merchants constantly: the ability to connect with customers, enhance credibility and leverage word-of-mouth.

From a consumer perspective, social shopping taps into basic principles of human behavior. Marketers increasingly recognize the potential of social shopping and are aligned with Zavee’s perspective on integrating social networking functionality with search and review capabilities:

In social shopping, you see recommendations and reviews that your friends have shared. You see items that your friends have purchased or brands that your friends have shopped with. This matters a lot when you’re shopping for a digital camera and are stuck deciding between three different models. Of course, the last 10 years’ worth of people’s purchasing histories and written reviews on Amazon may help you narrow your choice – if you can filter out the noise. But those reviewers are entirely anonymous to you, even though they may use a real name and have a rating history with the site.

We believe that 2010 will be the year in which social shopping comes of age. This clearly is good news for Zavee. We believe that our social shopping platform, which also integrates a cash-back rewards program and a mechanism for raising funds for local civic and charitable organizations, offers a compelling value proposition for merchants, consumers and causes. We can’t wait to prove it.

From all of us @Zavee, a happy, healthy and prosperous New Year to all!

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A Few (More) Words About Word of Mouth

by Ron on Tuesday, December 8th, 2009

Recently on Zavee Thinking we posted about how word of mouth (WOM) is simultaneously very powerful yet very fragile. It’s powerful because there is no stronger influence on a purchase decision than the recommendation of a trusted, knowledgeable individual. It’s fragile because so much can intervene to prevent that recommendation from being made and acted on. This post is about how merchants can make WOM less fragile by increasing the chances that a recommendation from the right customer will reach the right shopper at the right time. (Apologies in advance for the length of the post – this is something we think about a lot.)

The obvious place to start is at the point of sale, where the merchant has the most direct ability to influence customer satisfaction. Here we are talking primarily about intensity and latency: how strongly an emotion is felt and how long the feeling lasts. One clear way to increase the intensity and latency of customer satisfaction is to provide an over-the-top, mind-blowing, truly unforgettable experience at the point of sale (can we call it an OTTMBTUE?). That will certainly keep things top of mind! Unfortunately, the OTTMBTUE has a few drawbacks. First, not all categories and not all interactions are equally suited to blowing the customer away. Second, the typical means of providing an OTTMBTUE involves some form of payment to the customer, such as an upgrade or a free item. While merchants often have to make such a payment to an unhappy customer to right a wrong, applying that strategy in the hope of making a happy customer ecstatic can get very expensive – especially when the customer determines that she should be treated that way at every visit.

On the other hand, it is possible for creative merchants to create extremely high levels of customer satisfaction without giving away too much margin. One of my favorite examples is Tesco, the UK grocery chain. Stuck between a premium chain and a discounter, Tesco repositioned itself as a service-oriented brand. From 1995-2004 the company produced a campaign starring Prunella Scales and Jane Horrocks that used the tagline “Every Little Helps” (we would say, “Every Little Bit Helps”) to demonstrate Tesco’s commitment to the customer. If you’ve never seen this spot you’re missing a treat.

Another way to increase the latency, and perhaps the intensity, of customer satisfaction is to communicate with the satisfied customer early and often. Car dealers and some hotels, among others, get this half right: they email surveys to customers almost immediately but rarely follow up. If a customer gets a phone call after submitting a survey, it is more likely that the customer had reported a good experience or a bad one? Of course it’s important that merchants address issues raised by customers – but surveys may not be the best way to keep a delighted customer both happy and talkative. If a merchant can identify a very satisfied customer at the point of sale, a phone call several days later – just to chat, not to sell – can reinforce the feeling of satisfaction that the customer took away from the store. (Having conversations on social media is also a good idea.) The customer feels special because in fact she is being treated special. The merchant can’t treat everyone this way, and it may require an investment to learn which customers should be treated this way, but reinforcing customer satisfaction can increase the length of time the positive emotions remain top of mind and may even add to them.

Latency and intensity are both about time: the longer the customer’s intention to recommend the merchant remains top of mind the greater the likelihood that the customer will encounter someone who will act on the recommendation. Another factor is confidence. In order to act on a recommendation, the potential customer must have confidence in the recommending customer both generally and within the specific domain. If a customer is not someone who inspires confidence generally there is not much the merchant can do about it, but the merchant should know better than to treat that customer as a source of potential WOM.

via iproclaim.com

via iproclaim.com

However, the merchant can help a customer become more knowledgeable about the merchant’s domain and thereby increase the likelihood that a customer’s recommendations will be taken seriously and acted upon. Domains where the inherent level of difficulty is high are natural categories for this, and, indeed, internet legend Gary Vaynerchuck (almost 850,000 followers on Twitter) got his viral start posting how-to videos about wine on YouTube. Imagine a customer who leaves Gary’s store not just having received solicitous attention and paid a fair price for good wine but who has received an education, too. That customer not only is more credible as a recommender in the wine domain but probably has wine (and Gary’s store) top of mind for a longer period of time than otherwise.

The final point at which WOM is fragile also involves time: the person who receives the recommendation must be at or near the point of intention if he is going to act on it. Even if everything else lines up – a delighted customer leaves the store and immediately meets a friend who trusts her judgment generally and her knowledge of the domain specifically – the recommendation will not be acted upon if the friend has no intention of making an imminent purchase in that domain. Is there anything the merchant can do in this situation? It depends. If the friend has no interest in the merchant’s domain there is really no point to the recommendation. If this is not the case, however, the merchant can try to capture the friend’s contact information and leverage the recommendation as a reason to communicate with the friend (if the friend opts in). If the friend is disposed to trust the customer’s recommendation the merchant may be able to convert the friend to a customer the next time the friend is near the point of intention based on the prior, unsuccessful recommendation. Finally, by continually communicating with the satisfied customer, and indeed by repeatedly providing a positive experience, the merchant increases the likelihood that the customer will again encounter the friend (or perhaps a different one) closer to the point of intention.

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