Dr. Martha Rogers, coined the term CRM.

How a business can collaborate with customers

Becky Carroll interviews Dr. Martha Rogers

Martha Rogers, PhD., is a recognized expert on customer-centric business strategies. She co-founded the Peppers & Rogers Group of Norwalk, CT. and helped pioneer the concept of treating customers as individuals instead of as part of a market segment. An acclaimed author and speaker, Business 2.0 magazine named Dr. Rogers one of the 19 most important business gurus of the past century. The World Technology Network called her "an innovator most likely to create visionary ripple effects."

Here, Dr. Rogers discusses how crowdsourcing is impacting relationships with customers--and within corporations.

Becky Carroll: How does crowdsourcing fit in with the concept of customer engagement and collaboration with organizations?

Dr. Martha Rogers: I think some of the most interesting crowdsourcing happens inside companies. There are some very cool examples.

We’ve been saying one way to measure customer value is whether the customer is willing to collaborate. If you let me learn more about you, I get information on you, my customer, that I can’t get anywhere else. We have a give and take: you get something from me, I get something from you.

In the past, this was being built on a customer-by-customer basis. Now, it is no longer one customer at a time. Whether we know it or not, that customer is now posting these interactions on their blog. An important calculation done ten years ago was that it is possible for one person to be connected to approximately 150 other people. People move in and out of that connection, but we can’t handle more than that. This means that now, for each and every customer, we now have 150 relationships represented.

Companies need to move into the area of not just “you tell me” collaboration, but into co-creation. This could be for the next marketing message or the next product. When we look at the ability of companies to do this, we think about creating a “beehive culture.” When a bee looks at a flower, the bee is attracted to it because the flower has bright colors and is beautiful. But the bee will only go back to the flower if the nectar is good. If our customers don’t talk to each other, advertising is all we need to attract them. If our customers do talk to each other, we have to provide the nectar-- true engagement–-or they will eat us alive, then tell everyone if we are really cool or really bad. If we are a commodity, we won’t even rate.

It becomes interesting when we think about what we can do to collaborate with customers, and we help create things that matter to the customer and the company. Crowdsourcing can bring this into true alignment. Market research (on products like) cupholders in the car can only get you so far. We need to get things co-created by those people who are hungry to buy them.

Q: What is your opinion on today’s trend of asking customers to submit their TV commercial for a brand?

A: Those TV advertisements have potential for collaboration. The ones I have seen so far are only clever gimmicks. The company still gets a final say, so this is really just information gathering rather than true customer collaboration. It is a very powerful concept, but customers don’t really need the permission of the company to do this. Just look at the real customer-created ads on YouTube for Hillary Clinton. They are most likely not officially approved!

Q: How should companies reward or compensate their customers who contribute to these ideas?

A: There are three ways to incent or reward customers for collaboration. First, just getting a say in something important that affects your life is a huge reward. For example, I wish that Briggs and Riley would call me and ask me this: create three pieces of luggage for us. I would be thrilled. I could make them just the way I want them, and I wouldn’t even be looking for a sale price. I would be happy to finally get it the way I want it.

For us to understand crowdsourcing, we have to understand James Surowiecki’s book, (The Wisdom of Crowds). (It) states that the more diverse the crowds, the more likely they are to make better decisions than a homogeneous group, such as deacons in a church. You get wisdom from a diverse group of people that comes closer to the best decision. This is the right formula for innovation as well. When companies pull from teams that are quite different from each other, including people of differing ages, people with traditional views and others with non-traditional views, we can see the value of real diversity, as opposed to politically correct diversity.

Second, companies committed to crowdsourcing are those most likely to innovate. Some companies are even forming smaller companies within the larger one to help with this as well as to reward customers for their participation. For example, 1-800 FLOWERS is doing this. Jim McCann is forming a new wine company within his flower company, and he is giving part of this company to customers who will co-create with him. The reward here is the success of the business. Customers are motivated because they have more of a stake in it. This helps create long-term value for companies.

The third way to incent customers is, of course, the traditional method employed by loyalty programs: points, product rewards, etc.

True collaboration is way more likely to succeed. Would I collaborate with companies on certain things that are extremely important to me, things I live out of every day, like my luggage? Yes! I wouldn’t do this for all areas. Here is another personal example--HP photo paper. I am an extremely heavy digital photo user. I begged HP to let me tell them things they need to do to improve their products. For example, the choices for printing photos are to print out four 3x5 photos on one page or to print out two 5x7 photos on one page. I want to print out one 3x5 and two 5x7 photos on one page. The point here is that HP is avoiding engagement. It would take the teensiest little effort to co-create with its customers – and I would be thrilled – but it is not a priority for them.

Q: What about companies that are concerned about loss of control?

A: Wake up; it is already lost! There was control as long as the messages came only from the company. Those days are long gone, and we can’t wish them back. In a world where there is no control, what can you do? The best thing is to play a part, be present, and direct some of the traffic. We can’t try to put a structure on crowdsourcing. The real control comes form one thing--the ability of companies to be trusted by their customers. They will allow mistakes, but this only comes when the customer trusts the company.

In the Jet Blue scenario a few months ago, we heard a lot about unhappy customers, a CEO who took the time to apologize to both customers and employees, and even this didn’t stop the bloggers. Who came to Jet Blue's rescue? Their most frequent flyers. They said, "Guys, knock it off. I fly them twice a week, and it has been great. Yes, they made a mistake, but they owned up to it and set a plan for the future." This conversation came from customers who know it is a good company. Jet Blue couldn’t rebuild this kind of trust. Customers needed to hear it from other customers.

How do we do this with shareholder value and profit? Building value for tomorrow is intertwined with employees trusting the company and customers trusting the employees. We need to figure out how to bring all these interests into alignment. The constituents include the brands, the product managers, the employees: none of these pay the company money. The customers do. The shareholders have to back it, and management has to support it.

Crowdsourcing doesn’t work as well--and trust can’t happen--when there is no alignment. For example, I heard a story on NPR about the loan industry and trust. These loan companies were originally very successful, and the company owners became billionaires. There are now a lot of loans going bad, and employees are blowing the whistle. These employees were told to make a sale no matter what, basically being told to lie if necessary. It must not have been very much fun to work there. Crowdsourcing for a company will only work when we allow customers to make the best decisions they can and those customers are served well by employees who like to serve them. There is trust.

Q: What do you think the next phase of crowdsourcing will be? Has it hit its true potential yet?

A: It is still very experimental. This is the flip side to me of customer empowerment. When we take the customer's point of view, the customer says, "I can find out from others what they think and then tell others what I like or don’t like." How do we take advantage of crowdsourcing from the company's point of view? This is not as interesting as customer empowerment. The Long Tail becomes the fat tail. We get better at thinking about what the heavy users want, instead of what the average customer wants. The James Surowiecki book is a good example. In it, he shares what happened around the Space Shuttle Challenger disaster and the stock market. The crowd somehow knew which stocks to punish. Somehow, the crowd knows long before the experts do.

Q: Do you have a good example of crowdsourcing?

A: Some organizations are throwing ideas out to the company to vote on. For example, one company has an exercise they call “Mutual FUN.” Each employee gets $50,000 of play money, and they can buy shares of various stocks they like. The company actually looks at what employees are doing to help them decide where to invest as a corporation. They find the employees are usually right. Of course, the final corporate decision makers can say no, but it one case, the employees voted something in and strongly supported it. It ended up accounting for 30% of the company’s revenue.

One final example related to word of mouth. When Chipotle opened their first store in Manhattan, they only had $35,000 to spend. They posted fliers around the area advertising free burritos and used the money to give away 6,000 burritos. Well, the store was a success, as is the company today.

(Edited by Marla Crockett)