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Amazon lost one of its most loyal customers yesterday – ME.

I used to be a walking billboard for Amazon. I felt like they cared about me and were delivering me good services. I ignored those who told me that I could buy products cheaper in other places. I felt special.

I  know of at least a dozen people who bought their Kindle and countless others who bought books based on my recommendations. Knowing that customers who become customers through word of mouth can be twice as valuable as customers that come in through advertising, that must be worth something. Plus, I bought 850 items from them over the years – that’s a heck of a lot of stuff…especially when considering that many of those items are not books, but 4 digit purchases like high end cameras, high end lenses, and barbecues.

But I will now donate my new Kindle, buy the iPad, and test other book delivery services.

Why?

Because they told me I was not special after all…

My Kindle (the second one I bought) broke last Friday. I called Saturday and was promised a new one by Tuesday. Tuesday, no Kindle. Wednesday, no Kindle. Wednesday I call again. This time their automatic callback system calls me and puts me in a 10 minute queue. The chipper customer service rep assured me that this feature was working properly – as there is no way for the system to know how many people are in the queue. Duh, how dare I expect technology-savvy Amazon to write software that would check the length of the waiting line  before calling me…

She proceeds by telling me that there is no record of my call on Saturday, and that she will reenter an order for a replacement Kindle that will get to me on Friday…no 1 day shipping this time, two days. She also apologized for the inconvenience and offered me a $5 discount on future purchases to make up for it. I choked, asked her whether she really said $5, and when she confirmed I told her that she could keep the generous offer.

So that is the value that Amazon puts on me as a customer: $5.

And I thought I was special.

I have been staking my social reputation for more than a decade on recommending them, I have been sending them thousands of dollars for stuff that I did not always need…$5.

You see, this is what went wrong here, and many companies make that mistake. I wasn’t looking for any compensation. I was just looking for a good old apology. If they wanted to give me something, they could have done it through a gift – like upgrading my 3g so it works in Europe, or sending me a few free books based on my recommendations. I would have been blown away and would have continued to act as an unpaid advertorial for the company. But the minute they put a monetary value on me I switched in a totally different mode. So that is what they think I am worth…$5.

You do not need to pay people to make up for mistakes and you do not need to pay them when they help you…mixing the two is bad business.

There is no question that customer reference programs do work. Long employed to support sales and marketing (you cannot talk to an analyst without having customer references) efforts in the B2B space, they tap into one of the age-old Human 1.0 characteristics – the drive to mimic the behavior of others, especially of those who are perceived to be successful within our tribes.

The problem with many traditional customer reference programs is that they are based on the old marketing principles – designed for interrupt-driven company-to-prospect communications, product-centric, and non-reciprocal. It’s no surprise that in a Hyper-Social world they no longer deliver the expected results.

So what are marketers to do? As is usual in the Hyper-Social world, the answer is pretty straightforward. Here are 5 things that marketers should consider when developing Hyper-Socially enabled customer reference programs.

1. Let go of control and empower customers to tell their own stories
   At the risk of sounding like a broken record, it’s important to understand that the most important conversations are no longer the ones that happen between your company and its customers/prospects, but instead the conversations that happen among them. They’ve come to distrust the information that comes from your company, and with the advent of social media and communities they have much more opportunities to get information from unbiased sources (e.g., colleagues & acquaintances) that carry much more credibility. A majority of the customer stories that lead to buying decisions no longer come from your company but are instead originating within your customer tribes (online communities, industry associations, etc.). When I explained this to a marketing agency owner who also owned a print shop, he was originally skeptical, but then remembered how he had made a multimillion dollar press purchase decision not based on any information that came from the press manufacturer, but rather based on a trusted fellow print shop owner within his industry association. So if you want a successful customer reference program, you need to find ways to help your customers tell their own stories within their own networks. You don’t want to control or help them shape their story, you want to provide them with information that will help them strengthen their story and improve their status as opinion leaders within their network.
2. Make sure all your customer stories are customer-centric to a fault
   Most customer references are product- and company-centric. They are focused on confirming the features and benefits of certain product attributes more so than the customer pains and tribulations associated with successful product deployment and adoption. For the minority of customer references that will originate from your company,  you need to ensure that they are customer-centric to a fault. Not only will they carry more credibility, they will also travel better as “retellable” stories among your customer and prospect networks.
3. Think tribes, not market-segments
   It is true that in a majority of cases people will only accept customer reference stories from withing their own industry – thinking that anyone outside of their industry does not understand the issues specific to their environment. That does not mean that you should develop customer stories only around market segments. See if you can also develop them around tribes – groups of people within your industries that tend to hang together based on common behavioral characteristics. So instead of documenting a customer story for pharmaceutical CIOs, see if you can develop one for CIOs who are passionate about sustainability.
4. Don’t pay for your customer references
   On more than one occasion have I written about the cons and cons of paying people for any kind of feedback. The same is true for customer stories. If you have to pay someone for a story, it’s probably not a very strong story – definitely not one that your customer would be willing to tell his friends without being compensated for it first. So don’t put it out there. Of course, that does not mean that you should not base your customer reference program on reciprocity – you should. Allow the customer who recommends your product to give a gift to those he is recommending the product to – a small discount, or a special free feature – or make everyone feel warm and fuzzy by having reference program metrics trigger donations to worthwhile charities.
5. Forget information channels and think knowledge networks
   Most customer reference stories are written like brochures – they have the facts, the benefits (including amazing ROIs), and information about the company and its products. They are information rich and lack real knowledge. They are built to be distributed through information channels like email newsletters, traditional media outlets, and customer story aggregation web sites. The problem is that when your customers talk to colleagues, friends, and acquaintances, they do not transfer information, they transfer knowledge and stories. If you reference stories don’t have those, they will not travel along the knowledge networks where buying decisions are increasingly being made.

Customer reference programs should not be set up as standalone programs – they need to be part of your overall Hyper-Social efforts, including your word of mouth activities.

What do you think? I would appreciate your feedback on this as I will be leading a conversation on the topic at the upcoming customer reference forum.

First off, thanks for your patience after this long hiatus in my blog activity. Now let’s just get back into it!

When you are trying to “fabricate” Word of Mouth (WOM) for your offerings, who do you think of approaching first? Chances are that your first choice is to enlist the help of  your most loyal customers. After all, they have the success stories to tell others, they like you, and you have an existing relationship with them – it’s a “no-brainer.”

In reality, additional WOM from that group will have the least impact on your sales because those people likely already told their networks about how good you are. It’s the WOM from non-loyal customers and prospects, those who have not informed their network about you (or may not even know you yet) that will have the highest impact on sales. When you think about it that way it makes just as much sense as Peter Drucker saying that most firms should focus their new product innovation on non-customers since 70% of all customers that will be needed to ensure a firm’s future revenue are not currently customers..

You don’t buy it? Well fortunately there are a couple of studies by David Godes and Dina Mayzlin that prove this point. They did find that the impact of WOM from non-loyals on sales was indeed bigger than the impact of WOM from loyal customers. The other counter-intuitive (or maybe not) observation that came out of the study is the fact that among the non-loyal customers, it is not the opinion leaders who will be buzzing. Opinion leaders, or experts, will only buzz about stuff that they feel strong (and thus loyal) about. The people who seem to be the most effective buzzers within the non loyals are all highly connected. It is not clear, however, whether highly connected individuals are a good predictor of becoming an effective buzzer – making for a tricky targeting strategy.

There has been a lot of research on the value of acquiring a customer though Word of Mouth versus Traditional Marketing. One recent project, which was published in the Journal of Marketing this past September, found that the long term elasticity (defined as the percentage of change in new customer acquisition to the percentage of change in the corresponding marketing driver) for Word of Mouth is 20 times higher than the elasticity for for events and 30 times higher than the elasticity for media appearances. Another study, this one from last year, found that the lifetime value of a customer acquired through word of mouth can be twice that of the lifetime value of a customer acquired through traditional marketing. And they can bring in twice the amount of additional business through their own positive word of mouth compared to those who were acquired through traditional marketing programs.

There is no question that customers who are acquired through word of mouth will be buzzing more and longer than those who are acquired through traditional marketing means. Some companies are actually able to quantify the value of a word of mouth referral. Unfortunatelly, the knee-jerk reaction of many marketers who quantify that referral value is to use it to calculate the financial incentive that they are willing to pay to stimulate word of mouth referrals.

That is where the system breaks down.

If you give me a pure financial incentive to make a referral, I will evaluate whether it’s worth spending some of my social capital for the amount of money that you are giving me (and chances are it won’t). As Dan Ariely calls it, I will evaluate the referral transaction in my market framework. If you do not give me any financial incentive, I will evaluate making a referral in my social framework (e.g., I am actually helping the person who I am referring this product or service to? Or I am helping the company person who was helpful with me in dealing with my problem by bringing her more business?). While there is no research data that I am aware of to back this up, I believe that the financial incentive-based word of mouth will look a lot like traditional marketing-based customer acquisition programs – resulting in a lot less buzzing and lower customer lifetime value.

Now what if you were putting incentives in place that were social in nature rather than financial. Don’t give me an incentive that would trigger the evaluation of what I do in a market framework, but allow me to give a valuable gift to the person who I am referring to you. If I like your offering and you increase the value that I deliver to my friends or colleagues by referring them to you, then you have a winner.

The key to success is not by commercializing the social – it’s by making the social stronger.

What do you think?

Marshall Ganz is the person who designed organizational systems for the Barack Obama campaign. In listening to him on NPR’s On the Media about how they motivated and coached Obama volunteers to promote their candidate and recruit other volunteers, I was struck by the following passage:

What we helped them understand is that the first thing they need to learn is how to articulate their own story, in other words, what is it that moved them to become involved and engaged, because it’s from their own story that they’re going to be able to most effectively engage others. So when people leave, they leave equipped to do that. That’s sort of the foundational piece.

And in the initial series in California, we launched 200 teams in two weekends that, with the support of four staff people, built that operation out there to the point where it could make 100,000 phone calls a day. This is like an investment in civic assets, in local communities that no political campaign has done for years.

The right benefited from being rooted in social movements, which do this because that’s what social movements do. They translate values into action; they bring people in to work together. But on the progressive side, everybody had become marketeers. Everybody’d been marketing their cause or marketing their candidates as if it was another bar of soap, transforming people from citizens into customers.

What we did was bring the citizenship back in and put the people back in charge, and then put the tools in their hands.

For me the biggest difference is not to bring the citizenship back, it’s about realizing that the power of personal stories – what motivated you to buy into this cause – is much stronger than that of talking points about the cause.

The same is true for brands, products and services. Let people tell their own narrative about why they like it instead of trying to get them to sing from the same song sheet with canned corporate speak.

I am scheduled to travel to Belgium to visit my father who was diagnosed with two aneurisms and is facing a fairly complex and dangerous operation later this month. When he had an aneurism 17 years ago it burst and not only did he almost lose his live – he lost his business.

So I made reservations on Air France to go visit, and when I called my parents today with my itinerary I realized that I had made a mistake. I wanted to come back on the 27th and for some reason when I ordered through airfrance.com they booked me a train from Brussels to Parin on the 27th and a flight on the 28th. Now I order stuff online all the time, and if there is an overnight situation I expect the site to alert me to this. I called Air France, hoping that they would rectify the situation, as I do not want to spend a night around the Paris Airport and also need to be back in the US on the 27th. When I heard that they had plenty of room on the 27th, I thought it would be a no-brainer for them to change my reservation – and was even prepared to pay a fine for what surely was their screwed up user interface. But no, they could not change it – I begged, played nice, tried the empathy card – but the answer was no way, non, merde…you lose your ticket and buy a new one (which I did – but on Air Lingus – hoping the Irish are somewhat better).

Now my family has been using Air France ever since the Belgian Airline went out of business 6 or so years ago.

In these bad economic times, you would expect companies whose service are going to be the first to be cut from personal and business budgets to do everything they can to hold on to their customers – especially if it does not cost them a dime to accommodate the change request which would satisfy the customer, and perhaps make up for their deficient product offering.

I am flabbergasted – but should I? You could blame customer service arrogance, something that the French have been accused of, but in the end it has become an industry-wide behavioral attitude.

How do we customers give them the middle finger?

Joseph Jaffe delivered the Society for New Communications Research keynote speech last night. During his presentation he was making the case that marketing can be conversational.

As I have written before, I do not believe that marketing can be conversations. First off, and as David Weinberger suggested in an interview I did with him last year, I do not trust marketers to carry conversations without screwing it up for the rest of us.

I also do not think that all aspects of marketing can be or should be conversational. Think about new product innovation as an example. Sure, you will benefit from getting ideas and feedback from your user base and especially you prospecting base, but at some point the marketing product manager needs to act as a benevolent dictator and make decisions on what goes into the next generation product – and that may include features that did not pass the user popularity filter, or features that may not even come from the user base at all. The same is true for pricing – where coming to a price based on user feedback may in fact mean leaving a ton of money on the table.

Markets are conversations – marketing is not…

A new research study by the Society of New Communications Research (disclosure – I am a senior fellow in the society and have been peripherally involved with the study), “Exploring the Link Between Customer Care and Brand Reputation in the Age of Social Media,” found that affluent consumers are using social media to share their customer service experience and learn about other’s care experiences when making purchase decisions.

Some of the top findings include:

• 59.1% of respondents use social media to “vent” about a customer care experience (ed. note: glad to see I am in the majority…)
• 72.2% of respondents research companies’ customer care online prior to purchasing products and services at least sometimes
• 74% choose companies/brands based on others’ customer care experiences shared online

Again – proof that while positive word of mouth may outweigh negative word of mouth, and that off-line word of mouth may outweigh online word of mouth, the online negative word of mouth may have much more impact on purchasing decisions as they are found while the buyer is in active buying mode.

You brand is defined by the consumer, not by you – I think everyone can agree with that. In the same breath, most marketing pundits will add the fact that you can no longer control your brand – an assertion I am not sure goes hand in hand with the first one.

You brand gets defined by the UI (User Interface) of your company, the interface through which your customers and prospects interact with your company. That interface gets determined by pre-sale activities – i.e., advertising, retail layout, retail personnel attitude, telemarketing, sales people’s knowledge of the industry, etc -, as well as immediate post-sale activities – i.e., packaging, ease of use to set up the products, available help options, etc. -, and the long term post sale activities – i.e., telephone support, return policies, warranty policies, on-site support, etc. That makes up a lot of links in the chain that determines your brand in the mind of the consumers which your company controls.

So in effect, you do control the brand in the mind of the consumer. If some link in the chain is broken, meaning not supporting the overall brand promise you are trying to establish for your company, that is when you lose control of your brand. That is when people will start talking with one another about the fact that what you promise and what you deliver is different. Once that starts, you should focus on fixing the overall UI of your company instead of getting into communication fire-fighting mode or crisis communication mode.

The Online Publisher Association announced that it added Community as a category to its Internet Activity Index (IAI). So they will now measure how much time consumers spend online with Content, Communications, Commerce, Search and Community.

The OPA defines community as:

“Web sites and applications that combine user-generated content with communications in order to foster relationships between individual members and groups of members. Many Community sites are content driven, and they were previously accounted for in the Content category. However Community’s content is largely user-generated, and when merged with communication, creates a specific category of online activity.”

The IAI numbers for January show that consumers spent 42.7% of their online time interacting with content, 28.7% with communications, 16.1% with commerce, 7.5% with community and 5.0% with search.

AdAge picked up on the story, declaring “When It Comes to Time Spent Online, Content Trumps Community.”

But wait a minute here, adding community as a category at the same level as content, communications, search and commerce, is like comparing apples and oranges. Or better yet, comparing apples and oranges with air or water. Communities are combinations of content, commerce, communications and search. And communities affect the usage pattern of all the above categories and vice versa. So if I am spending time on Amazon.com, am I spending time with commerce, content, search or community? Obviously the end result is commerce if I buy something, but it could also be searching without buying or interacting with content (both user generated reviews and published content) without commerce. The fact that Amazon is a community which leverages my personal profile very well (another component of communities) is determining my interactions and time consumption on that site. The same can be said for many other sites that combine content with community. If I am spending time on the WSJ Health blog, I am spending time with content or community? If as a car buff I spend time on Carspace.com, I am spending time with commerce, content or community? Would I spend as much time conducting commerce, searching for stuff or interacting with the content on those sites if there were no community component to them?

Probably not…

Besides the fact something does not sit right with the categories, many conclusions drawn from the new numbers by AdAge and the IPA are equally flawed. Jim Nail at the Cymphony’s Influence 2.0 blog captures those flaws in detail in his post today (well worth the read). A couple of highlights include:

• The fact that page views per person in content dropped 225 pages suggests that a number of content sites were just moved to community.
• Content sites show 480 pages per month per user vs. 380 pages for community sites. So from an ad perspective, the reach may be just the same.
• Another factor not reflected in the new numbers is influence. If a third of people below 30 don’t make buying decisions before checking with their social networks, the impact of communities on the commerce is obviously not reflected in those numbers.

We should of course remember the agendas that both organizations are representing – those of advertisers and publishers.