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Lesson 20- Social Media is the Democratization of Consumerism

“Although your customers won’t love you if you give bad service,

your competitors will” – Kate Zabriskie[1]

Content created by Darin Gerdes. Copyright Great Business Networking.

I grew up in the 1980s. It was a different time. I walked a mile to school each day. I rode my bike without a helmet. I played in the park unsupervised. When I got home, my television choices were limited to ABC, CBS, NBC, FOX, PBS and some local station I can no longer recall. If I wanted to watch a show, I had to be in front of the television at the time it aired, and when I wanted to turn the TV channel, I had to get up and do it myself.
We did not have the same technology we have today. In elementary school, we played games on Apple IIs. In middle school, we learned to program on Commodore 64 computers. The internet was a decade away. Business operations seem light years away too. Large companies had mainframe computers still crunching data on punched cards, and we were a long way from Bill Gates’s vision of “A computer on every desk.”[2]
The minimum wage was $3.35 per hour. Personnel used typewriters to fill file cabinets, and carbon-paper forms were commonly used for duplication. The copy machine was still something of an expensive wonder and the leading business technology was the fax machine.
 
The Imbalance
Marketing was one-sided and information was asymmetric. The business had the information; the customer didn’t. In To Sell is Human, Dan Pink talked about the information asymmetry between buyers and sellers before the internet. There is a reason that used car salesmen had terrible reputations for dishonesty. Even today, they are at the bottom of the list in Gallup Surveys of who we trust least, rivaling members of Congress.[3]
Think about the information imbalance. The used-car salesman knew a lot about the car while the buyers knew next to nothing about the car.  Yet, customers were asked to trust the salesmen, never mind the strong financial incentive to deceive and manipulate. The deck was stacked in the used-car salesman’s favor. Pink wrote:
When sellers know more than buyers, buyers must beware. It’s no accident that people in the Americas, Europe, and Asia today often know only two words of Latin. In a world of information asymmetry, the guiding principle is caveat emptor—buyer beware.[4]
This arrangement would grow weaker over time. Think about the effect that CarFax.com, AutoTrader.com, and TrueCar.com had on the buying process. These companies provide information to the customer about the true value of the car, leveling the playing field even before you add social media.
Buyers can also post messages on social media sites asking for advice such as: “I need to buy a new minivan. Any suggestions?” Enthusiastic owners of Dodge Caravans and Honda Odysseys advertise these vehicles better than paid salesmen, especially when they testify that they have recently passed the two hundred thousand mile mark. Owners of other vehicles warn you not to buy other vans that had twice the problems with half the mileage. Others will identify particular dealers for polite service, reasonable rates, or their tendency to take advantage of the unsuspecting. Information is kryptonite to such predators. Pink Concludes:
The balance has shifted. If you’re a buyer and you’ve got just as much information as the seller, along with the means to talk back, you’re no longer the only one who needs to be on notice. In a world of information parity, new guiding principle is caveat venditor—seller beware.[5]
 
The Level of Difficulty
Back in the 1980s, when my parents wanted to purchase something, they would load the kids into our fake-wood-grain Dodge Diplomat station wagon. I would try to get to the car first so that I could stake out my claim to the large flat trunk. To my young mind, it was the best way to travel.
We would go to the store so that mom could see what was on the shelf. If she wanted to compare prices, we would have a long day driving between three or four different stores. When I asked how much longer, I would be told  “not much longer” which was my mom’s shorthand for “it’s going to be a long day.” When my mom finally selected an item, if she was unhappy with it, there was not much that she could do about it. This is what made shopping so long and difficult. It is a time-period that is almost difficult to imagine today, and I would not believe it if I had not lived it.
The internet really did change everything. In the early days, the internet didn’t have much of an effect on this kind of relationship. At first, companies who went online used the internet like a store window. Before long, as consumers felt more comfortable placing orders online, the internet became a cash register. Eventually, the internet became a platform where buyers and sellers could communicate.
Now my wife shops on Amazon.com in a fraction of the time that my mom spent comparing prices. She can place an order that eliminates any need for travel. The bulk of her time is not spent traveling from store to store but reading customer reviews about products.
 
Early Attempts to Listen to Customers
While “the customer is always right,” historically, companies assumed that they knew what customers wanted.  According to the Procter & Gamble, webpage, in 1924 P & G became “the first company to conduct deliberate, data-based market research with consumers.”[6] This was a cutting-edge innovation for the time. Nearly all companies have tried to provide what consumers wanted but few asked them in a systematic way.
P&G began to print customer feedback numbers on their products in 1973.[7] The 1(800) customer feedback numbers are so ubiquitous now that it is hard to imagine a time when they were not available. At the time, long-distance calls were expensive, so toll-free 800 numbers helped consumers connect with the company.
It was a small start, but smart companies grew ears. They learned what customers liked, and more importantly, what they didn’t like.  In The One Minute Manager, Ken Blanchard called feedback, “The breakfast of champions.”[8] He was right. A long distance bill was a small price to pay for such helpful advice. Yet, this was still a long way from a meaningful conversation.
 
The Democratization of Consumerism
Social media now makes it possible for consumers to provide feedback to companies. It converts “talking to” to “speaking with.” Social media allows us to connect with everyone more effectively than ever before. Time and distance collapse. Grandma can watch her grandson blow out the candles on his birthday cake halfway across the country through a webcam, and consumers can talk to companies and get answers. Now, companies must listen when consumers speak. If they do not listen, everyone else will hear about it.
This two–way conversation changed the terms of the power dynamics between buyers and sellers. Imagine a scale. The seller is on the left side and the buyers are on the right. Suppose, for example, that 100 units of knowledge about the product exist. In the dark ages before the internet, sellers may have had 90 of the 100 units and customers had only 10 units.
The scale has been evening out over time as buyers share information about products through customer reviews. Today, the consumer has roughly the same amount of information as the seller. This is not the same information, but it is the important information that will help him make decisions. Poor products are now publically scorned and outstanding products ride high. Today, it is more difficult for sellers to dupe unsuspecting audiences than it was in the 1980s. Caveat venditor.
You help the process every time you rate a product online. This crowdsourced information is used by consumers to add weight to their side of the scale. Let me give you a personal example.
This morning I was looking for a new desktop microphone for my laptop. I often dictate the first draft of what I write, so I want a microphone that will transcribe my words clearly. I googled the words desktop microphone and clicked shopping. I sorted by price among products from hundreds of companies.  Then I read the reviews of those with four or more stars. This took me about 10 minutes and I still have the rest of my day.
This process works on a larger scale too. We just purchased a minivan. Before we started the process, we combed through reviews of minivans online. We identified the brands with the best reputation before we began to shop for price. This crowdsourced information advantage seems almost unfair to the seller.
 
Social Media As a Conversation
This crowdsourcing function—asking others about products or posting about products you like on Facebook—is just the tip of the iceberg.  It is a brave new world, and smart companies are recognizing that social media is not a passing fad.
In the 1980s, companies broadcast their message to as many people as they could. Today, that message may or may not get through the noise, but if it does, consumers verify before they trust. In those days, when you got a bad product, you made do. Perhaps you would complain to a few of your friends. Perhaps you’d never buy that product again, but your options for recourse were limited. According to Dave Kerpen, author of Likeable Social Media:
It used to be said that that happy customers tell three people about their experiences and unhappy customers tell ten about their bad ones. But . . . today thanks to social media, happy customers and unhappy customers can tell thousands of people their feelings about a company’s service or products with just a few clicks, relying on the like button as a virtual endorsement.[9]
To drive home the point about how technology enables this process, Pete Blackshaw entitled his book Satisfied customers tell three friends, angry customers tell 3,000.[10] The best scenario is that the angry customer talks to you. If they reach out, you had better listen.
Take Bernadette’s experience for example. Bernadette purchased a cell phone online. After she submitted the form, she realized that she had made an error so she called customer service. The customer service representative told her that he could not change the setting she had selected. She asked to speak to the manager and was told that he was the manager. She then asked to speak to his manager. After a little tap dancing, he told her that his manager would call her back later that day.
While she was waiting for this less-than-thrilling answer, Bernadette went to LinkedIn and found the name of the president of the company, and connected with him. He accepted her request and she explained what had transpired. Minutes later she received an apologetic phone call from a new manager who was as eager to help her as the first manager was to avoid responsibility. That is the power of social media as a conversation.
Alan was on a long trip and he had purchased a gas discount card that was supposed to cut the cost if he shopped at particular gas stations.  He tried to use the card, but the store owner refused to accept it. Frustrated, he tweeted about his experience while he pumped his gas. Before long the company responded and made it right, providing free gas and their assurances that the card would be honored in the future.
Recently, we added a new minivan to our insurance policy. The first person my wife spoke with gave her pretty steep rate.  Later, a retention expert miraculously worked the policy premium back down offering us a much more reasonable rate. After checking out other companies, she called back to asked the company to cancel our policy.  However, we reconsidered, and came back to the original company.  I asked that the policy be reinstated. Now, however, the agent claimed that because we canceled the policy, he couldn’t guarantee this rate.  He claimed that, “the computer would not let him process it” until a particular date and he asked us to trust him. Caveat emptor.
 
 
 
I looked up the name of the company’s president online.  I sent him an email entitled “Why I’m reluctantly leaving your company.”  I explained my dilemma, adding:
I WANT to give you my business.  I just need to know that I can have the rate that I had before my wife canceled.
So if you can guarantee the rate that I had before my wife cancelled, I’ll sign on the dotted line right now.
If not, we will take the other bid elsewhere. 
The next morning, I received a call from a customer service representative who politely apologized and explained that the president had asked her to call me and find out how to make this right.  Within 24 hours, the problem had been resolved.
This was a win-win solution.  I wanted to pay, they wanted my money, and my risk profile hadn’t really changed from the day before.  The company fixed the problem, blunting the likelihood that I would complain on Facebook or Twitter about awful customer service.  I’m a satisfied customer, and now I have no plans to leave this company.
 
Summary of Social Media
In previous lessons, we talked about major social media platforms—LinkedIn, Facebook, Twitter, and blogs are some of the most common.  I taught you how to set up accounts, create profiles, and use each of them. Most social media applications share similar characteristics.
Social media, by definition are, internet applications. The 1(800) numbers described above would not qualify. Content is user generated and decentralized. No central office manages the flow of information. No government is directing who is responsible to say what. In contrast, it is a modern example of Adam Smith’s invisible hand. By following our own interests, we provide valuable content for others as a side effect.
The content may be less than perfect, unlike what you would expect in a book or a magazine, but it is usually free, targeted, and accessible. It is not only flexible, but it is more current than that which is published for profit.
Media elites once determined the message and made editorial decisions about what was news. Today, anyone who can attract an audience in the open public square can make news. In the context of social media, everyone who is interested gets to vote by liking, sharing, or retweeting. When something has gone viral, it is only because many people think it is worthy of attention. This is a great leveler. The poorest company can produce viral content; the richest company cannot pay to make bad content go viral.
In this new environment, groups and communities naturally form. Reputation is everything. We listen to those who are credible and discount those who have earned a negative reputation. This is true of both people and products.
You now understand how social media works, and how it has opened the communication channels between buyer and seller. Are you using that information? In the next lesson, we will talk about how you can use social media marketing to encourage the conversation and set yourself apart from your competition.
Actionable items:
Go back and again look at ratings of your company and your competition. The market is speaking. Are you listening?
 
How can you encourage your customers to provide feedback through Social Media?
 
 
End Notes
 
[1] Hazeldine, S., Norton, C. J., & Dell, M. (2008). Bare knuckle customer service: How to deliver a knockout customer experience and hammer the competition. Birmingham: Lean Marketing Press.
[2] Gates, B., Myhrvold, N., & Rinearson, P. (1995). The road ahead. New York: Viking. (p. 4).
[3] Newport, F. (2012, December 3). Congress retains low honesty rating. Gallup. Retrieved from http://www.gallup.com/poll/159035/congress-retains-low-honesty-rating.aspx
[4] Pink, D. H. (2012). To sell is human: The surprising truth about moving others. New York: Riverhead Books. (p. 49)
[5] Pink, D. H. (2012). To sell is human: The surprising truth about moving others. New York: Riverhead Books. (p. 50)
[6] Our heritage. (2011 Proctor and Gamble. Retrieved from https://www.pg.com/en_ANZ/company/our-heritage.shtml
[7] Our heritage. (2011 Proctor and Gamble. Retrieved from https://www.pg.com/en_ANZ/company/our-heritage.shtml
[8] Blanchard, K. H., & Johnson, S. (1982). The one-minute manager. New York: Morrow. (p. 68).
[9] Kerpen, D. (2011). Likeable social media: How to delight your customers, create an irresistible brand, and be generally amazing on Facebook (& other social networks). New York: McGraw-Hill. (p. 2).
[10] Blackshaw, P. (2008). Satisfied customers tell three friends, angry customers tell 3,000: Running a business in today’s consumer driven world. New York: Doubleday.