Bring Customers Inside the Company

Look closely at most companies and you will see pretty much the same thing. You will see product development using the same old market research to develop the next great product. You will see marketing using the same old media to develop awareness of the product. You will see the same old channels selling the product. And you will see the same old contact centres providing after-sales service to customers. The company does its stuff inside the company walls, whilst customers wait patiently outside. And by and large it works. Or at least it did.

But things are changing. Look closely at companies like 3M, General Motors and Starbucks and you will see something very different. You will see customers actively involved in many business activities where previously they wouldn't have been welcome. You will see them involved in driving innovation. You will see them involved in generating marketing media. And you will see them involved in word-of-mouth driven sales. You will see that these companies have in effect brought their customers "inside" the business.

The first area where customers have got involved is in driving innovation. Companies like 3M have long used lead customers—those customers who push 3M's products to the very edge and beyond— in developing new products. MIT professor Eric von Hippel in his book Democratising Innovation shows that customer-driven innovation produces better, more profitable products than those developed through traditional product development. Patricia Seybold takes these ideas still further in her book and blog, Outside Innovation.

The second area where customer have got involved is in generating their own media. One of the leaders in this area has been General Motors. It started with a tie-up between its Chevy Tahoe and the Apprentice TV programme. Fans of the Tahoe could generate Tahoe ads themselves using mix and match components. Over 17,000 ads were eventually generated by the campaign. But not all of them were positive; about 15% of the ads were created by people who dislike gas-guzzling trucks. Despite this, GM decide to extend its foray in customer-generated media with the Superbowl College Ad Challenge. Over 820 college teams signed up to submit their own ads to be screened during the Superbowl. And lest we forget, the Superbowl is the single biggest ad-fest of the year, generating over 400m impressions. The Challenge even has its own blog.

The final area where customer have always been involved is in generating sales through word-of-mouth (WOM) recommendation. Although this has long been a fact of life, companies have only just started to understand the real power of WOM. For many new economy companies, WOM is the only sales strategy they have ever had. Just look at Hotmail, Google and the recently sold for USD$1.65 Bn YouTube. But old-economy companies are using WOM too. Perhaps the best examples today are mobile telcos, who aided by analytical consultancies like Xtract, are using social network analysis tools to identify the alpha customers at the centre of customer calling networks. As London School of Economics researcher Paul Marsden has shown, companies with great WOM have much better financials than companies who don't.

These are just a few examples of customers being brought inside companies to co-create value. In the next few posts I will look at a more examples of customer-co-creation and ask the 64,000 dollar question: Is customer co-creation the next evolutionary phase of Customer Management?

Graham Hill