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February 13, 2008

Comments

Matt Blass

@TEd "In any partnership, both parties must assume responsibility for the satisfying each other's needs."

In the consumer to producer context, I completely disagree with this. The consumer precisely does not nor ever will have that responsibility. Satisfying his own needs is the consumer's only responsibility, and I think this sounds reasonable when you realize that the relationship isn't between a consumer and a producer, but between a consumer and a set of producers (Actually, it's a set of consumers to a set of producers, but it's easier to analyze a one to many situation than a many to many.)

CRM is the solution companies have created to solve the producer to consumers (one to many) relationship problem. VRM would solve the reverse one to many relationship problem of consumer to producers. Humans are very good (relatively speaking) at dealing with one to one relationships. We're capable of projecting and reading those projections like dilated eyes, plushing skin, tone of voice, change in posture. However, our performance is reduced in multi-tasking situations, and we're not so good at dealing with the one to many problem, which is why we've built technology to help us with that.

I as a consumer have no responsibility to any single producer, and I am free to accept or reject the offers of any and all producers. That's how it is today, and that won't change with VRM. The producer still bears the risk of invention and production. However, the producer still as rights to the profits of such an endeavor, and since a consumer as no right to those profits, a consumer has no interest nor responsibility in satisfying a single producer's needs. That's just how competition works.

It is in the interest of the producer to satisfy the needs of the consumer because that would inevitably bring in more profits (including an appropriate price point as part of a consumer's needs). However, every interaction between consumer and producer is a potential step in creating or strengthening a relationship. Stronger relationships create stronger bonds between the two parties, and that can turn into a true partnership, but that's not the goal of VRM. VRM may well improve the one to one relationship, but it's primary goal is improving the consumer to producers relationship problem.

When a company does something like "guarantees to the customer if the product or service he bought fails to meet his needs" it's reducing the risk of consumer backlash. Companies do this precisely because the costomer does not "share a small portion of the risk temporarily," but assumes 100% of the risk permanently at the point of purchase, and at the same point the producer takes 100% of the profit (which is its reward for taking on the original risk of production). Because of that, the producer has an inherent responsibility to the consumer in quality of product at the least, and in the case of consumer dissatisfaction (where there is no legally binding responsibility), it benefits the company to satisfy the consumer post purchase, but that is for its own benefit as much as the consumer's benefit.

For savvy companies, VRM will open opportunities for reducing investment and production risk. However, most companies probably won't realize the benefit until the benefit is the same for all companies just as companies are still struggling with the benefits of the internet. Most immediately, VRM will help companies reduce operation costs, instead of reducing risk. VRM will help reduce transaction cost, and other costs associated with information storage such as information gathering and updating.

Still, consumer to producer relationships will improve with VRM much like CRM improved, although did not solve, the one to one relationship. But the primary goal is improving consumer to producers relationship, and that will inevitably help the producer, even if it helps the consumer more.

AlanMitchell

Hi Ted,

Thanks for you comments.

I think you have summed up the seller’s dilemma admirably. Under industrial age production, sellers risk sometimes vast amounts of money upfront in plant, machinery, labour, raw materials and distribution just to expose themselves to a customer who glances at what they have produced, says ‘No’ and saunters off.

If too many customers do this, then all the investment goes up in smoke and the firm dies. That’s why, as night follows day, this system creates push marketing. Once you have made it, you have to sell it. It’s a survival necessity. The higher your risk, the more control you seek.

It’s also why, even though suppliers should meet their needs by also meeting customers needs, they often find themselves trying to push customers into buying their wares whether it meets their needs or not.

Under buyer centric commerce/VRM however, individuals are increasingly able to say to suppliers ‘Here I am. This is what I want’.
[Fore more on this see https://www.rightsideup.net/ChoicetoVoice.htm, https://www.rightsideup.net/buyercentricbasics2.htm, https://www.rightsideup.net/PersonalKnowledgeBanks.htm]

As these ‘bottom up’ flows of information gain critical mass they serve to reduce suppliers’ risk on multiple fronts:
• Marketing – who to talk to, about what, when
• Sales – who is a hot lead and who is not
• Innovation – what to focus on and what to avoid; e.g. what to make in the first place
• Production – how much to make
• Distribution – who to make it available to

It’s precisely because buyer centric commerce/VRM reduces supplier risk in these ways that it enables suppliers to ease up on their quest for control – a quest that’s typically counter-productive anyway because of the way it engenders customer resistance.

Your point about supplier risk explains why suppliers’ desire to exert control over their customers is so strong. I would contend however, that in the emerging environment it’s precisely this quest for control that does most to hinder risk reduction while also undermining the very customer relationships suppliers are so keen to build.

Ted Grigg

You say:
“That’s why, in reality, most day-to-day activities of most marketers do not revolve around ‘identifying and meeting needs’. They revolve around something entirely different: trying to influence customers and potential customers to choose their particular offerings. Here, marketing quickly flips over from ‘identifying and meeting customer needs’ to ‘changing customer attitudes and behaviours’ … (for the company’s benefit). Not about meeting customer needs therefore, but meeting the needs of the corporation”

This discussion can follow many directions. But your premise seems to revolve around who leads or controls the process for meeting the customers needs. Your article does not address how the company can assure that its needs are also fulfilled.

In a sense, the ideal you seek implies a true partnership between the company and the individual where both parties actively seek to create something that meets the customer's needs.

That makes sense, up to a point.

In any partnership, both parties must assume responsibility for the satisfying each other's needs. But is that achievable in a company and customer relationship with the customer in control? I contend that it is not.

If the partnership fails, the company looses, but the customer looses very little if anything. Doesn't the customer care mostly about his own needs? If the product or service fails, the customer simply walks away with the company holding the bag.

With mutual benefits, both partners must share in the risk.

Customers have no desire to share in the company's investment risk. That is why companies must take control of the process. The company meets its needs by also meeting the customer's needs.

The customer may share a small portion of the risk temporarily. But typically, the company provides guarantees to the customer if the product or service he bought fails to meet his needs.

An added dimension is that whoever puts the most money down and takes the greatest risk in the partnership should also control it.

Does this make sense?

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