Role of Social Media in Creating Word of Mouth and Customer Experience

by Paul Williams


What's the role of social media in creating Word of Mouth (WOM)?

You could say there are two parts to WOM - the analog and the digital.

• Analog is person to person... face to face. I'll also put written and print media into the analog category.


• Digital WOM is converted and stored in a format that can be sent and re-sent electronically.

Social media refers to tools that allow us to easily spread the story electronically, digitally. Like a pyramid marketing scheme I tell my network, and they tell theirs, and they tell theirs... Social media tools (blogs, Facebook, Twitter etc) make the spread easy.

In fact, I may have to contradict my earlier statements indicating that Malcolm Gladwell and Seth Godin are the father's of Word of Mouth (WOM).


The REAL Originators of Word Of Mouth

I think the folks who wrote the Faberge Organics Shampoo commercials in the 80s invented it.

Do you remember those ads?

If you tell two friends about Faberge Organics shampoo with wheat germ oil and honey, they'll tell two friends, and so on... and so on... and so on...

Sorry about the poor quality - this is all I could find.


(Feed Link For Faberge Commercial)


Has the focus of Social Media had a negative effect on the Customer Experience?

I'll say potentially, YES. Marketers dazzled by the shiny object that social media is, may think they've solved their communication problem - or are engaging in a 'meaningful' way because - for example - they've created a Facebook Fan Page for their business.


False Sense Of Security

Let me pick on one of my favorite brands, Starbucks Coffee, as an example. Specifically, their "My Starbucks Idea" website. Through this site, Starbucks welcomes everyone to submit product, program, design, service, or ANY idea.

The My Starbucks Idea home page declares:


"You know better than anyone else what you want from Starbucks. So tell us. What's your Starbucks Idea? Revolutionary or simple - we want to hear it. Share your ideas, tell us what you think of other people's ideas and join the discussion. We're here, and we're ready to make ideas happen."

• Starbucks thinks they are listening.


• Customers think Starbucks is listening, and taking action.


• Starbucks thinks they've "checked the box" (to some extent) in being a social media player by having this site.


• Power to the people!

However, if you look at the "milestone" of the 50 Ideas Launched and Still Counting! - celebrating customer ideas implemented - Starbucks has technically only implemented six (6) ideas submitted by customers. If you dig into it - as John has on his Brand Autopsy site in his Tough Love For Starbucks post - you'll see that most ideas were already in the works, would have been done anyway, or aren't even customer-facing ideas (e.g. Employee discount on work clothes).

A problem with social media is that companies may think - simply by participating in the trend - that they're meeting customer need. Starbucks has invested in this suggestion site and believe they are checking the "we care and listen to customers" box. They think they've fulfilled the portion of their strategy, that supports the objective: to "Develop enthusiastically satisfied customers all of the time."

Starbucks isn't being as democratic with ideas as they claim (and think) they are. It really isn't "power to the people." Social media (or maybe improper use of social media) is giving Starbucks a false sense of security.

Social media isn't for everyone. To "engage in meaningful conversation" may actually mean a conversation. A face-to-face, human-to-human dialogue. For example, the kind a barista can have with a customer at Starbucks.


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Paul Williams is a professional problem solver at Idea Sandbox. He can help you create remarkable ideas to grow your business. You may read more at his website and find him Twittering as @IdeaSandbox.

Does BN Nook Compete with Amazon or Starbucks?

by Steve McKee

There has been a flurry of news lately about Barnes & Noble's new e-reader, the Nook. It will compete head on with Amazon's Kindle and Sony's Reader, offering additional features such as limited book sharing and newspaper subscriptions. If successful, of course, those features will be matched by the Nook's competitors, just as Barnes & Noble has matched their price points.

It's fascinating to watch these three powerful companies--the dominant bricks-and-mortar bookseller, the dominant online bookseller, and a long-dominate electronic industry player - compete in this new arena. And word is that Apple's e-reader isn't far behind, which will further mix things up (and will be good for us all).
I couldn't help noticing, however, a little aside in a recent Wall Street Journal article about the Nook. The article was talking about how Nook users would be able to receive discounts and other special offers when they walk into the store, a smart use by Barnes & Noble of its one true competitive advantage over Amazon. But the piece went on to say this: "Eventually, the company says, customers will be able to read entire e-books for free inside the physical store."

Read entire e-books for free? Why would Barnes & Noble want to give away content? How's this for a reason: the company may have up its strategic sleeve the idea that it can become the other Third Place.

Starbucks has always been an appealing place to linger, and many people go there to enjoy a good read as they nurse their lattes (most Starbucks locations sell a handful of newspapers and books to encourage just such behavior). While Barnes & Noble has in recent years been adding coffee bars to many of its locations, they have always seemed to be somewhat of an afterthought and secondary to the company's primary purpose of selling books. But by offering free in-store content with the Nook, Barnes & Noble seems to clearly be saying that this is they place they want people to linger. And Since none of us can be in two places at one time, Starbucks and Barnes & Noble may increasingly butt heads.

It's a fascinating world in which we live, where two previously unrelated companies can wake up and find themselves arch-competitors, and it's fun to watch such changing dynamics unfold. Keep your eye on Barnes & Noble as it continues to take advantage of its physical locations (the one thing its current big competitor, Amazon, can't match). In combatting one foe it may have just picked a fight with another.

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Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.

Innovation for CEOs

by Bob Donnelly

Innovation is one of the most misunderstood concepts; time to clear things up.

What is an innovator?

Definitions abound by all kinds of academics and business experts, but in reality most innovations are just a new way of doing something.

One of my favorite innovations was George Foreman's lean, mean, grilling machine and all of its recent derivatives. George just developed a way to reduce the fat in grilling. His simple innovation has resulted in about 100 million George Foreman Grills being sold since they were introduced in 1995.

In 1997 Foreman entered into a $137.5 million deal with the grill manufacturer for unrestricted global use of his name to market the devices. Not bad for such a simple innovation by a classic entrepreneur who was also the heavyweight champion of the world at one time and who went on to reclaim the title when he was 44 years old.

Another part of the confusion about innovation is how symbiotic it is with entrepreneurship. Entrepreneurs are innovators by nature.

Foreman is infamous for the entrepreneurial/innovative way he has used his name and persona to market a clothing line for big men, shoes for diabetics, a chain of health-food restaurants, household cleaning products, and even his Big Boy sausages. If you visit his website you can buy cookbooks, autographed boxing gloves and even his memoirs. And George has done all of this while boxing and having 10 children!

Another confusing description for a real innovation is "disruptive technology". The best way I can describe disruptive technology is an unexpected new way of doing things that through a quality, price or service improvement changes the dynamics of the marketplace.

Dell changed the business model for selling computers when they introduced their online model for ordering customized computers. Dell eliminated the need for finished goods inventory in stores or warehouses, and in so doing created a cash cow as a result of customers paying for the product before it was made, and in turn allowing Dell to pay their suppliers before the product was delivered.

Starbuck's was another classic innovation when introduced and for many years thereafter. How about the Swiffer, a simple replacement for the age old mop and pail. Even better was the Tide Spot Stick for removing stains from ties and clothing.

Something that I had been waiting years for was the iPod. And what an innovation the iPhone has become.

Apple, through Steve Jobs creativity and vision has become an icon for innovation. Apple stores are jammed with customers talking to iHeads and sitting at Genius Bars waiting to be helped. How about that for innovative retailing?

Rachel Ray began with her 30 Minute Meals concept and has expanded the market for all things tagged with her logo, much like George Foreman before her and many others who have become a part of our world. I often wonder, what did everyone do before all of these wonderful innovations?

I guess the real explanation of innovation is the entrepreneurs perpetual ability to come up with better, faster and cheaper solutions to their own and others problems. But, the best innovations are those that solve a problem before the customer realizes that they have it.

Think about all the problems that you encounter or things that bug you in your day-to-day activities. Each one of those problems or daily irritants represents an opportunity to come up with a creative and innovative solution. Look around your marketplace at all the issues customers have or problems that they constantly deal with and you will have a list ripe for potential innovations.

What kinds of innovations can you come up with for your business?

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Bob Donnelly is the Editor of the online Entrepreneurial CEO column for Chief Executive magazine.

How Understanding Customer Jobs turns Crowdsourcing into Smartsourcing

by Graham Hill

Crowdsourcing is becoming a part of many companies' innovation strategy. But crowdsourcing suffers from a number of problems that limit its effectiveness. By selecting 'emerging customers' - who are better at spotting winning innovations - and helping them innovate around unmet customer needs, crowdsourcing can be turned into smartsourcing. Leading companies like Cisco already use smartsourcing to identify tomorrow's winning innovations.

Peter Drucker the gurus' guru famously said, "Because the purpose of business is to create a customer, the business enterprise has two - and only two - basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs." Marketing is hard enough to get right, but innovation is a whole lot harder still. Depending on the industry, about 80% of new products fail on introduction in the market. And up to 60% fail in reintroduction.

To overcome this disastrous failure rate, companies have started to recruit customers to generate ideas for new products. A process Jeff Howe called Crowdsourcing in a 2006 article in Wired magazine. There are a number of great examples of successful crowdsourcing programmes, however, two examples illustrate what happens when companies start crowdsourcing programmes without really thinking them through properly.

The first of these is Dell with its Ideastorm programme. Anyone can come up with a computer-related idea, post it on the Ideastorm website, vote for the best ideas, comment about them and hopefully, see them implemented. Sounds great. Why not harness ideas from customers? And why not get customers to vote for them to cut programme staff costs. Unfortunately, crowdsourcing has a number of serious problems. The first problem is that customers, even large numbers of them, typically produce average, unremarkable, incremental innovations, rather than the step-change innovations that companies hope for. Although 12,483 ideas have been posted on the website since Ideastorm started in February 2007, only 366 have been implemented to-date, a miserly 2.9% of the total. And most of the implemented ideas provide only incremental improvements to Dell's business. To its credit, Dell says that Ideastorm is intended as an extension of its relationship with its customers, rather than just as a source of product ideas. Just as well, as Ideastorm is a failure as a source of winning new innovations.

The second example is Starbucks with its My Starbucks Idea. Similar to Ideastorm, My Starbucks Idea allows any registered customer to post an idea, vote for the best ideas, comment on them and see them implemented. Or not as the case may be. My Starbucks Idea, despite receiving over 75,653 ideas, has only implemented 315 ideas to-date, an even more miserly 0.4% of the total. You wouldn't think that having ideas to improve a coffee-house chain would be all that difficult to implement. But the low rate of implementation illustrates the second problem with crowdsourcing; that customers have no idea of how the business works, what business capabilities it has and thus, no idea whether even the simplest of ideas can realistically be implemented, (let alone whether they will turn a profit). In stark contrast to Starbucks, Toyota implements over 1,000,000 employee ideas every year, 95% of them within 10 days of being submitted. But unlike Starbucks's customers, Toyota's employees know exactly where the best innovation opportunities lie, what can realistically be implemented and the profit-impact of doing so. Coming up with innovations like this is part of the Toyota Way. It's what makes Toyota such a unique company.

And there is another big problem too. Customers expend a lot of creative goodwill generating ideas for Dell and Starbucks, only to see the vast majority of them shot down by their peers or ignored by the companies. All that talk by Dell of building a relationship with customers quickly comes to nothing when its customers' hard work creating ideas is neither recognised nor rewarded. As Dell and Starbucks attempts at crowdsourcing illustrate only too clearly, crowdsourcing's supposed advantage of harnessing customers as sources of innovation is in fact its biggest weakness. The fact is that most customers simply don't have any good ideas, those that do are often not implementable and the miniscule implementation rate burns a lot of customer goodwill in the process.

So what should companies who still want to harness customers to generate winning innovations do? How can they turn wasteful crowdsourcing into productive smartsourcing.

One company that got it right is Cisco with its I-Prize competition. Starting in late 2007, Cisco asked innovators to come up with ideas that could it turn into the next billion dollar business. Cisco collected over 1,200 ideas from 2,500 innovators in 104 countries across the globe The ideas were initially filtered to see if they tackled Cisco's pain paints, if they could be delivered using Cisco's capabilities and if Cisco could make money from doing so. The filtering was done by a full-time, six-man team, drawn from across Cisco's business. The best 40 ideas were then assigned a mentor to help the innovators turn their idea into a workable business plan. The final 10 ideas were then selected, and taken though an interview and further filtering process to find the eventual winner. A single idea -- for a smart electricity grid -- by a German/Russian team was selected to collect the $250,000 prize.

Cisco's success at smartsourcing shows the importance of focussing ideas on particular pain points or opportunities. Rather than just let innovators come up with ideas, it is much better to focus their creativity on just those opportunities where they can produce a breakthrough. As innovation gurus Tony Ulwick of Strategyn and Prof. Clayton Christensen have shown, in today's customer-centric business environment this means understanding the jobs customers are trying to do and the outcomes they want from doing them. And not only functional 'doing' jobs, but also emotional jobs that describe how the customer feels about what they are doing and social jobs that describe how the customer relates to their peers too. Once you understand customer jobs and outcomes, they should be prioritised to find the areas where the importance to customers is highest but satisfaction with current solutions is lowest. This is the innovation sweet spot. Experience suggests that focussing on the innovation sweet spot can produce an 80% success rate for new products; a whole lot better than the 80% failure rate we commonly see.

Only when you know where the innovation sweet spot is should you seek to harness the creativity of customers. And not just any old customers either. As Dell and Starbucks' experience with crowdsourcing shows, harvesting ideas from the mass of customers produces a very small number of good ideas and a large volume of poor ones. It also generates a lot of wasteful costs if ideas are to be assessed properly. Recent research on emergent customers suggests that by screening potential customer innovators for their ability to imagine how innovations can be developed that will be successful in the market, the quality of ideas generated is significantly increased. Emergent customers produce much better ideas than the mass of customers, better ideas even than the lead-customers who are alredy pushing products beyond wheree they were designed to go. Just think what being able to identify the best innovators from the broad customer base could mean for companies. Companies could harvest a smaller number of high quality ideas. That would free up resources to help develop the best ideas together with customers. And more ideas would make it successfully to market. It would enable companies to turn inefficient, wasteful crowdsourcing into much more productive smartsourcing.

As the failure of Dell and Starbucks' crowdsourcing programmes, and the success Cisco's smartsourcing one shows, understanding customer jobs provides a solid foundation for targeted open innovation, whilst identifying emergent customers provides the best way to harness just those customers whose ideas will help produce winning innovations: new products that help customers get important jobs done well and create profit for the company too.

What do you think? Have you been disappointed by crowdsourcing initiatives? Have you seen great examples of smartsourcing in action? Are you an emergent customer?


Further Reading:

Jeff Howe, The Rise of Crowdsourcing

Matthew May, Elegant Solutions: Breakthrough Thinking the Toyota Way

Harvard Business Review, Inside Cisco's Search for the Next Big Idea

Tony Ulwick, What is Outcome-driven Innovation?

Hoffman et al, Identifying and Using Emergent Consumers in Developing Radical Innovations

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Graham Hill is a Customer-centric Innovator and CRM Guru at CustomerThink.com. Follow me on Twitter.

Why MyStarbucksIdea is a Bad Idea

Today we will examine Starbucks' open innovation attempt - MyStarbucksIdea.

You may have come across it already, but it is worth examining because it represents one of the largest open innovation efforts to date, and it is the first I have seen built on a customized salesforce.com platform.

Some might say it is just a fancy suggestion box and not an open innovation effort, but it really depends on how you define open innovation.

MyStarbucksIdea.com is open innovation at work, not a mere suggestion box because a suggestion box is a black hole. People submit their suggestion and never know:

1. If anybody even sees it
2. What the reaction was to it
3. What the outcome was
4. What other people might think of the idea
5. How other people might make the idea even better

Open innovation principles say that if a company allows people from outside the company to provide ideas that the innovation that comes as a result will be greater than if ideation is maintained as the sole domain of employees. MyStarbucksIdea.com embraces those principles and takes it one step further in that it allows a couple of key community features:

1. Anyone can submit an idea
2. Users can vote on different ideas to indicate the wisdom of the crowd
3. Anyone can build a discussion around an idea by commenting on it
• As a result their is an opportunity for ideas to be refined and become more compelling than first presented by the original submission
4. Each registered user has an "inbox" that let's them see when someone responds to their submission
5. Finally Starbucks pulls it all together with the "Ideas in Action" page to show what they are doing with the submissions

This kind of implementation has a few fatal flaws however:

1. Competitors can benefit at the same time and possibly beat Starbucks to the punch if they respond faster
2. Numerous duplicate submissions over time will make it difficult for users to build upon anything other than the newest or the most popular ideas (which will be difficult to measure given the duplicates)
3. A lot of the obvious wins will be picked off within the first few months

So should Starbucks keep or ditch MyStarbucksIdea?

To answer that question I must answer it with another question. What is the purpose of innovation?

The purpose of innovation in the corporate world is to increase revenue and/or decrease costs, while also increasing competitive separation. Any other purpose has the potential to increase costs and possibly even to put you further behind your competition.

Innovation in the government or non-profit sectors can support the secondary purpose of facilitating knowledge sharing that the corporate world cannot support.

MyStarbucksIdea is a great implementation for a government or non-profit, but terrible for a corporation.

Here is what Starbucks should do:

1. Starbucks should switch to a suggestion box format, with a closed community aspect to evolve ideas
   
• Inviting people who submit similar suggestions to a closed forum to discuss their idea
• Inviting top contributors or bloggers to iterate on an idea together privately
2. Starbucks should throw out innovation challenges instead of hosting an open idea forum
3. Starbucks should keep the IdeasInAction page to report back on implemented (and only implemented) suggestions and challenge results
4. Starbucks should offer brand experience prizes (or possibly cash) at whatever level is necessary to encourage submissions and participation (which might be zero initially and escalate over time) while also building brand affinity

Congratulations, Starbucks, this a good first attempt.

However, it falls short of the kind of long-term improvement in innovation capability that ultimately results in a more profitable market leader - that's what we work with organizations to create.

The Trouble with Tully's

Running at "half-caff" in a caffeinated world.

In the first of a series of "From the Outside Looking In" articles I will give my take on how I would address challenges that different companies face.

For those of you not from Seattle or familiar with Tully's, it is a regional coffee chain based in Seattle. It probably has the distinction of being the second largest coffee chain in Seattle, although that doesn't really help it a whole lot.

Tully's has a big problem, or should I say a small problem. Tully's is too small to compete with Starbucks' buying power, but too big to be seen as a credible Starbucks alternative in the mind of those who refuse to patronize chains and instead favor local coffee houses. As a result Tully's struggles to differentiate themselves from their larger competitor, and continues to lose money.

Tully's has chosen to differentiate itself based on factors such as Free WiFi and Green Coffee. I don't mean green as in color, but instead that they only use 100% Certified Fair Trade Organic Espresso and a cup that is 100% compostable. They also carry tasty treats from Alki Bakery, and premium soft serve ice cream and ice cream shakes.

The trouble is that is where the differentiation stops. Walk into your average Tully's and unless someone told you, you might think you were in a Starbucks (only maybe slightly less nice). Tully's needs to do more to differentiate itself from the competition. If I were running Tully's here is what I would do:

Turn Tully's into a destination rather than just the closest coffee shop:

1. Install 802.11n and take steps to ensure its reliability


• Tully's has free WiFi already, but it's not very reliable and it's slow. Starbucks may charge, but their WiFi is faster and more reliable. If you're going to try and differentiate on a point, you have to delight customers not frustrate them.
  


2. Consider having a small conference room available for use in some locations
   


• Some smaller coffee shops use this to great success in driving hot beverage and food sales, but more importantly to drive loyalty


3. Don't sell any food unless you are going to sell best-in-class options


• Do a deal with Krispy Kreme to distribute their donuts, and not just for individual sale, but dozens and half-dozens as well


• Do a deal with Organics to Go or other compatible vendor for sandwiches


• Do a deal with an iconic bagel manufacturer


• Switch from Ghiradelli to Green & Blacks Organic as a chocolate supplier (hint of luxury) -- Godiva might make a good second choice


4. Focus on service, encouraging employees to make personal connections with customers and take small actions to loyalize customers


• Randomly select regular customers for free upsizing (Grande for the price of a Tall) or free upgrading (you've been chosen for a free flavor shot)


5. Look to eliminate queueing


• Touch 'n' Go Tully's Card embedded with Favorite Beverage (one-touch ordering and payment)


• SmartPhone application (see Starbucks blog entry from Feb2008)


• Phone ordering -- system recognizes phone number, favorite drink, and Tully's Card PIN


• Web ordering -- Cookie recognizes user, favorite drink, prompts for Tully's Card PIN (or allows customized orders)


• In-store kiosks for distributed ordering for people paying by credit card and Tully's card


6. Look to improve efficiency in other ways


• Introduce cup printing system (increase speed, reduce errors)


• Pass through toaster (we put the bread/bagel in and you take it out)


7. Space is King


• Not having access to Tully's financials, a quick analysis of Starbucks financials as a proxy shows that on a revenue per square foot basis, food delivers 20%, whole beans 10%, and coffee-making equipment 5% the revenue per square foot of hot drinks. This space needs to be worked harder or freed up for other purposes.
  


• Eliminate hot foods


• 65% of all coffee is consumed during the breakfast hours
  


• Work the space more efficiently by working hard to create a second and maybe even a third spike


• Do a deal with Jamba Juice to expand revenue without subsantially increasing space requirements


8. Continuous Innovation is the key to continuous differentiation


• I would help implement necessary organizational and cultural changes to engage the entire workforce in the process of helping Tully's establish and maintain an industry leadership position based on differentiation

OK Tully's, so now I've given eight differentiating points you can focus on. Brilliant execution will get you to the IPO you so desperately seek. Do you have the courage to take some of these steps?

What do the rest of you think out there? Are these ideas full of hope or full of folly?

Sound off!

Following the Line to Innovation - Mobile Applications

I came across a queue reduction application for the iPhone and iPod Touch yesterday that was intriguing. The application isn't quite finished or certified for use yet by Apple and Starbucks, but from what I gather it works something like this:

1. User comes in range of a Starbucks WiFi Hotspot
2. Application recognizes the Starbucks WiFi Hotspot or user initiates application
3. Application engages the user interface portion of the application
4. Application makes a connection
5. Application prompts user to order a Starbucks beverage
6. Application user interface facilitates the selection and transmission of the drink order (including a list of saved favorites to speed the process)
7. Application connects to the user's iTunes account
8. Application deducts funds from the user's iTunes account
9. Application creates a visual barcode with the information necessary to register payment
10. User places iPhone or iPod Touch with visual barcode under a reader at the pickup counter
11. User collects their beverage
    

The visual barcode (semacode) and scanner portion of the system could be made unnecessary (or relegated to backup system status), by instead transmitting a payment confirmation to Starbuck's on-site systems directly via the WiFi connection. In the backup scenario, the visual barcode would serve as an electronic receipt to show proof of payment in case the systems in the store doesn't receive the systematic payment immediately.

Imagine the convenience of getting a block or two from your favorite Starbucks, connecting, clicking 'The Usual' and proceeding directly to the drink pickup counter instead of waiting in line to order and pay.

Of course there is no reason why companies like McDonald's or Cinemark couldn't create similar applications to eliminate some of the queueing from our lives. If people could order this easily with their phones then businesses could reduce staffing or reallocate resources from order taking and payment processing to more value-added activities like preparing food or beverage orders.

Apps like this could be extended to the Web through the introduction of a store number field or store locator mini-application or pulldown at the beginning of the application sequence. This would allow you to order out of range of the in-store WiFi over your cellular network or from your home or office internet connection.

Less time spent waiting in lines?

Oh what a beautiful world.