Monthly Archives: October 2006

Online Communities – the growing phenomenon

If someone asks me to pick one thing that Internet has provided the World, I would pick connectivity. Internet has shrunk the World and brought people closer to each other due to this immense power of connectivity. Communication is easier and faster, Information is cheaper and globally accessible and Collaboration is more possible than ever before. With the emergence of broadband, all this has gained another layer of seamlessness and excellence. People can spend more time connected to the rest of the World. An important byproduct of all this is the advent of online communities.

Communities in form of newsgroups to discuss issues, marketplaces to buy and sell things, sites to share information and so on. Online communities is a growing part of anything and everything on Internet. There are communities to do anything online. Prominent ones that come to mind are Craigslist and Ebay to buy and sell things, Orkut and MySpace to do social networking, Messengers to communicate with people, MSDN and TechNet for technology discussions, Flickr and Picasa to share pictures, YouTube to share videos and many more. People spend a growing amount of time in these communities. And with more eyeballs spending more time somewhere, it becomes an obvious destination for the advertisers.

So what are some unique properties of these communities from the business perspective? This is one business that has an immense first comer first correctly done benefit. If a company gets a community established correctly and gains a critical mass of audience, it is nearly impossible to displace its position in the market. It’s sometimes not that obvious to understand why, but if we think about it, it makes a lot of sense. Just ask yourself some simple questions – where would you like to go if you want to buy something online – a marketplace with more buyers and sellers or less? Or where do you think a commodity will be rightly priced? I think the one with more. Along the same lines, which site will you choose for social networking? One where all your friends are massing or a deserted one? Obviously the former. Where will you search or share pictures and videos? Some place where there is a bigger crowd looking for it. Communities have a huge first correct doer advantage. Ones an online community of large number of users is created, it is very difficult to attract all of them to a new place. I think that justifies the reason why corporate giants are bidding huge amounts to buy some of these online communities. I think everyone knows that Google didn’t pay $1.65 billion to buy the technology expertise of YouTube. It basically bought the user base, or the established online community of YouTube.
Another uniqueness of the online communities is that they grow with the word of mouth. Advertisements can pull the initial customer base to a community, but the growth of a community is basically fueled by the word of mouth along with help from search engines for some communities that provide information. The initial adopters participate in these online communities, generate the buzz around it and pulls the masses over to it.

Online communities can act as a big boon (or bust) for any business. Communities can act as a big source of advertisement, through the word of mouth. People trust (or distrust) a product when others like them recommend it. Online communities are used by people to find recommendation for anything from a restaurant to an electronic equipment. Companies also use online communities to create buzz about their new product releases and getting the feedback for their products. Company representatives participate in the online forums and discussion groups to answer queries from the users of the products. In a way, online communities opened a whole new channel for the company to connect to their customers as well as potential customers.

How can an online business, in specific, use this communities phenomenon? In case of business on web, any company faces a very hard time maintaining their customer base. In most cases the barrier to change is as low as typing a new url in the address bar of the browser. So how can a company retain their customer base? The most common answer given by any dot com company executive will be by keep innovating and staying ahead of the competition. Of course, that’s true, but is there a way to raise the barrier to change for a customer? This is a very important issue and I think the answer lies in the communities phenomenon. Create a community experience around your business. Whoever your customer is, it is always possible to provide them the community experience out there, and ones a community of users is created, it significantly raises the barrier of change for the customers and even draws more customers to your business. The important thing to understand is that almost any online business can have a community designed around it, and with the breathtaking success of this phenomenon, there is no reason not to do that.

Don’t mess with Customer Service

Customer Service is the face of any business. Happy and satisfied customers is a prerequisite for customer retention and creating a positive image for the company. Success of any business highly depends on the services packaged with their products. Whether it is a software program which is developed to provide the services or a customer support representative providing support to the customer, it is very critical not to mess things there. Customer Service should be aligned properly with Marketing, Finance, Product development and other critical operations of the company to make sure the customer is getting served to the optimum standards.

Why is it so important to get this right? Well you can draw parallel between designing and customer service. If anything (be it a complex entity like building, vehicle or software application, or something as simple as a can opener) is designed perfectly, no one notices it. It becomes part of the regular work-flow. But if there is some flaw in it, something that is not as expected or intuitive, it gets highlighted. Same happens with customer service. Everyone expect is to be seamless. So as far as the customer is getting the service he expects, no one notices it. But as soon as the customer service experience is bad, the customer satisfaction index towards the entire company and its products dips down. That’s the nature of the game and everyone needs to accept it.

We can lay out some basic rules any company needs to follow to provide good customer service. First and foremost, don’t experiment in this area. It’s really astonishing to see how companies provide disastrous customer service just because they are experimenting with some cool new tool or technology in this area. The most common example that pops in my mind is speech recognition software to answer the customer calls. That’s a major disaster. Everyone in the software industry knows that the speech recognition technology is not yet ready to deploy as a dependable tool. Still companies use it in answering customer phone calls. No customer in the World is going to call you till they are in dire need of help and then when you ask them to speak the details, and try to interpret it with something which is not perfect, you are basically forcing them to blacklist your company. So let’s first make sure the technology we are using is sound and then use it on the customer. I think this is the last place you got to experiment.

Rule #2, don’t drag the customer to the tipping point. I think the entire reason a company has customer service is to keep the customers happy. A company should put a face in front of the customers so that the customers think that the company appreciate their business, not that you are one of zillion customers we have and we don’t care if we lose one. For instance, try to keep the wait time to a minimum. Companies should deploy good analytical tools to make sure that a customer is not holding phone for ever to be answered, or waiting for technician or delivery personal for too long to show up. Along the same lines, charge your customer reasonably. Asking insane amount of money to help a customer fix his computer on phone if it is out of warranty, or to use a feature that’s not covered in the customer’s opted plan is like burning bridges with them. This is like literally dragging the customer to the tipping point from where they have no option but look for alternatives. I understand that cost is important for the company to take into account, but showing some compassion over here might lead to a long term trust relationship with the customer.

One more thing that’s important in customer service is that the entire company should take this as a priority and stick to the commitment made to the customer. How often do you reach an airport to find out that the plane is overbooked and they don’t have space for you? Or your flight got cancelled for some “unknown” reason with no alternative but to wait? Or you reserved a rental car and that type of car is not available ( Or in Seinfeld’s World – they know how to take reservations, but they don’t know how to hold ’em.)? This should never happen. If as a company you are committing something to your customer, you need to stand behind it. Every company should have system in place to fulfil the commitment made to the customers.

In short, go an extra mile to keep the Customer satisfaction high, because you can have great products, awesome supply-chain and what not, but if you don’t have a satisfied and happy customer, you can not succeed.

80-20 rule and the Internet

A typical definition of 80-20 rule in the field of product development is 80% users use 20% features of any product. A slightly different interpretation – 80% of time a user ends up using 20% features of a product. This is true for any product in the software industry out there and lots of companies have become successful by pioneering those bare minimum 20% features of the products. The question that arises here is how? How can a company survive without fulfilling 100% customer requirements? Or in other words, why does a customer stick to a product which only fulfils 80% of their requirements? I think there are several reasons for that. First and foremost, is the barrier to change. Most customers start using a product when they feel that the product is fulfilling most of its requirement, which the product does. Now when they come across one requirement which is not fulfilled by the product, their natural tendency is to find a work around for this feature rather than abandoning the product and using something else. Another reason, cost associated with the change. Customers who paid certain amount to purchase the product that fulfills most of their requirement, normally chooses not to pay again in order to get a product that meets those edge case requirements. And if for any reason, that edge case becomes a common one, if starts getting close to that 20% basket and gets added to the product feature list.

This is the case for a typical software product out there installed on a customer’s computer. Now lets move on to the Internet. Is it the same there? Does this 80-20 rule works there as well? I think we should consider the points that help 80-20 rule work for desktop products and see their standing in the Internet world. First, the barrier to change. The barrier to change for a typical application on WWW, like search or online store is as negligible as typing a new url in the Address Bar. So if some customer is trying to search lyrics of a not so common song or looking for some special merchandise and cannot find it at one particular destination, they can just type in a different web site address and see if they can find it there (Yeah there is some barrier in case of an online store if you want to buy something you need to provide a payment source and your address, but I think you won’t mind doing that if you find a merchandise you didn’t find at your regular store). Second, cost of change. Well with most applications not charging anything to the end user to use it, I think the user has no cost of change. Talking about our previous applications, search run on advertisement revenue, so are free for the end user and an online store only charges a user when they are buying something over there. This means the 80-20 rule doesn’t work that well for a Web based product.

In fact, I think this 80-20 rule sometimes work against the product if the customer is able to locate an alternative with answers to all their requirements. If I am looking for some very uncommon information and I find it through one particular search engine, that search engine promptly secures a place in my list of favorites. Now I will know that whatever I want to search, I will look for it here. So now slowly I will start using this for my other 80% of the common queries as well. Similarly for an online store. If I find a not so common merchandise on a particular online store, the next time I want to buy something, I will go back to this store hoping that I have a much better chance of finding the product here. This is the reason behind the success of lots of Web based companies. They try to fulfill 100% of customer requirement. How do they do that? Its by maintaining a long tail…whether you do it by writing a better algorithm that fulfills all customer’s search requests or by supporting a more exhaustive inventory to find the customer any merchandise they are looking for. To sum up, these companies need to be highly customer focused and align their products and services to address customer needs in agile and innovative ways.

The Beta Culture

The Internet has revolutionized many things in many ways. One of the most significant things Internet has radically affected is products service based products delivery. It has reduced the distance between the customer and the producer of products. One of the interesting developments is the Beta release of products to the end customer. So what’s new here? Beta stage has always been there in technology products where the product is debugged, i.e. the stage after alpha (new features added to the products) and before release candidate (all important bugs removed). But this conventional definition of Beta is no longer true in the Internet World. How I see the Beta now is a stage encompassing market research, development, testing, debugging and early adoption. The idea is to get the initial concept out there to the customer with some prototypical implementation and do the rest with the help of the customers.

This is a great concept in many ways. Market research gets a whole new perspective. With the help of business intelligence software, market researchers can track the customer usage of the products, analyze the early responses and adoption scenarios. Product development becomes an agile process. The speed of an idea to convert into a product is more rapid then ever before. Reason – there’s no need to wait for market research to be completed and requirements to be assembled to start the development. It’s more of an ongoing process. Features can be added sporadically while customers are adopting the product as per customer needs and requirements. The biggest benefitter of all is testing and debugging. Instead of a few dedicated resources to test the product, Beta release opens the doors to the World, potential future customers to test the product. This in no way can replace those dedicated resources, but still the combined force of many many people using the product is like a great addition. Beta release is also a great way of booking the early adopter’s loyalty. Adding features to the product, fixing bugs and making changes based on feedback from early adopters make them advocates for the product which helps in mass adoption.

Beta release has some drawbacks of its own, specially for the established brands. If a product is launched in Beta and is very buggy and hard to adopt, it’s not easy to attract the customers back to the product with the competition providing equally compelling and attractive options. Another downside is if the company is not able to attend to the early adopters, take in their feedback and respond to it, these customers can influence mass adoption in a negative way. The bigger the brand behind the product, the more vulnerable is a Beta release.

Beta release is a real delight for start-ups wanting to establish a brand with the help of Internet community. With the immense power in the Web to connect people, it’s really good to have a positive word of mouth behind your brand as a whole and product in specific. It is very important to give due credit to the early adopters and recognize them in making the Beta a success. Companies roll out schemes to recognize the early adopters in different ways. One of the most prominent ones in the recent years which comes to mind is Gmail Beta. Google provided early adopters option to invite new users to have a Gmail account. This helped Google fulfill two objectives – gave early adopters a feeling as if they were a part of Gmail product in development and increased the public adoption of Gmail. Before the beta tag will get off Gmail, it will already have more than a million customers.

So when should a successful Beta release get rid of the Beta tag? I think, the best time for a product to come out of the Beta is when the product is ready to cross the chasm (Geoffrey Moore). Things like bug free product, stability and other technological issues are important considerations, but removing the Beta tag in a timely manner is also very important to attract a certain type of users who are not very excited to adopt a product which they think is not yet officially released. So when the product has enough customers to help it get into the main stream and get mass adoption, it should evolve into an official release.

Let’s do brand extension “correctly”

Since my blog post about Rights and Wrongs of Brand Extension, I have had lot of interesting discussions on this topic. Some very good thoughts came forward and we were able to classify all the brand extensions we talked about in right and wrong buckets using the three things mentioned there – creativity, innovation and link to existing product line. One point that again and again came forward, which is also the reason for me writing this post, was how a company that had wrong brand extension could have done it correctly? So let’s pick the two wrongs mentioned in the previous post – Amazon and Dell.

Amazon missed two (of the three) very important things in its brand extension, and that were the link to the existing product line and innovation. Here’s an online book store that got famous for its long tail and recommendations. Logically thinking, brand extension for this online store would have been selling products where the long tail and recommendations matter the most. Another logical brand extension would have been showcasing products similar to books to customers who came to their site looking for books. This suggests Amazon should have evolved into an online store selling and renting (in some cases) books, music, videos, computer and video games and software. I think by keeping this link to existing product line in mind, they could have fixed brand extension to a large extent. Trying to sell products like shoes, jewelry, grocery and pet supplies from their online store just broke this link and made it loose its essence. One could argue that this could have limited Amazon from going into a large part of 35 product categories they are involved in today. Well I think, keeping Amazon the extended book store to the products suggested above and spinning partner stores for these other product categories would have been a better idea. Amazon could have had distinct links to these stores from their original store landing page and search results in order to use the credibility and dependability of Amazon, may be shared the shopping accounts and user information and applied some of its innovative shopping experience to these other buckets. The important thing to note here is the segregation to prevent bad experience for a customer coming to the book store.

Another area that Amazon could have fixed during brand extension is innovation. Amazon, which rided on its innovative stinct all through the dot com boom and bust came up with no major innovation in brand extension. Along with creating an extended book store and partner stores, one innovative step Amazon should have taken in brand extension is segmenting its stores more on the customer intelligence and less on product categories. For example, a customer looking for Mystery novels would feel Amazon is a store for me where I can find all Mystery based books, videos and games to buy or rent, a community to get involved with others with similar taste and an extended search feature with categorized results around what I am looking for. Amazon does it to a great extent, but its not well meshed across products due to the wrong brand extension.

Moving on to Dell…I know lot of people believe that Dell did not fly off with electronics because Dell’s primary customer base was enterprises and not home customers. But I think, if Dell would have brought the kind of innovation and creativity they brought in selling computers in the field of electronics, they would have done much better in their brand extension. Dell evidently missed creativity and innovation in its brand extension to electronics. Dell is known for two things – Direct marketing to the end customer and build (or configure) your own personal computer. It went on to brand extension to electronics, a somewhat natural next step for the biggest computer maker in the World after already extending its brand in servers, storage and printers. It did link back to its computer product line by selling directly to the end customer, but the build your own stuff was not there. Well if you are Dell, you got to have that personalized experience in there to satisfy your customers.

How about trying to add it to electronics? I think it will be really creative if you ask your customer to take steps with you to build a digital camera instead of asking them to choose one from the given list of cameras. Literally speaking you don’t have to build one for each customer out there, what you can do is start from the most basic feature (say megapixels) and provide options (like optical zoom, digital zoom, screen size and memory type) to choose from to reach to a final model. It’s basically bringing the customization experience from the personal computers and applying it to electronics. In order to make this happen, Dell will have to (or make the equipment manufacturer they are partnering with) support enough options in each category to meet the customer needs. If Dell is successfully able to do this in electronics like cameras, MP3 players, televisions and so on, it will be a real innovative step to empower customers configure their own electronics leading to a successful brand extension.

Exercise to the reader ;-) please send me cases of brand extension, both successful and unsuccessful, which you think contradicts my thinking on this topic.