I recently heard about a customer complaint site on the web. Customers can go to this site when they are dissatisfied with a product or service. They can lodge a formal complaint, which the site will then forward to the relevant company to deal with.
Interestingly, the site was collecting customer data that was then being funneled back to interested companies for a price. Hence, it would be possible for a company to get a detailed profile of the customers who had complained about them! It was not clear if customers knew this when they registered at the site.
This is just one instance of a problem that has become very prevalent with businesses on the web. Companies on the Internet interact with a wide variety of actors, all of whom have their own idea of exactly what they want.
For instance, venture capitalists encourage firms to maximize their revenue sources by entering into financial relationships with a wide variety of actors. This can help them maximize their profit potential by not being overly dependent on one particular source.
While this is a sound financial argument, it can create a big strategic problem. Companies forget whom exactly they work for as they try to balance the needs of each set of actors. Soon, they may end up placing the needs of customers last – a prescription for disaster.
Consider, for example, a permission marketing agency like yesmail or PostMaster Direct. Such firms interface with at least two types of actors – consumers and advertisers. Consumers are interested in minimizing clutter and maximizing incentive. Advertisers want to show their ads to as many people in their target market as many times as possible.
If the firm determines that it will place the needs of advertisers ahead of the needs of consumers, it will end up sending a lot of ads to consumers. It may also decide to sell customer information to interested third parties. This may not be what the consumers want or expect, and the process may therefore turn them off.
On the other hand, if a permission marketing agency decides that it works for its consumers, things would be different. The company will treat customer information with the utmost care. Customers will be viewed as the owners of their information and will be able to exercise full control on its use. They will be viewed as partners with whom a relationship is important. The firm will carefully nurture these relationships by sending out a few ads in the most relevant categories, ensuring that customers will stay engaged in the process.
Ultimately, an agency that subordinates customer needs to the needs of other actors will not prosper in the long run. This may not be obvious when you are looking at revenue streams. If your business depends on advertising for its revenue then the source of the revenue will initially seem to be the advertisers. After all, they send you the check for the advertising.
However, if you pause to think about it, you will realize that the only reason advertisers are interested in you is because of your customers. If you do not have a lot of customers and those customers are not engaged in their communications with you, advertisers will receive poor results. Then, over time, that revenue stream will drop off, and you will not be able to charge high advertising rates.
Similarly, if you are a customer information aggregator planning to sell customer information at a profit, you should be asking yourself two key questions. First: “Are my customers aware that their information is being sold?” If the answer is no, then I would consider obtaining their consent before doing this. At least, I would inform them about this.
If you don’t inform them, consumers will get their news from the media, which will lead to concern about privacy issues. In most cases, privacy concerns arise because customers are perplexed. They do not know what exactly is being done with their information. Full, real-time disclosure takes away the mystery and enhances the relationship.
If you don’t involve customers in this way, you should ask yourself this second question: “Is the additional revenue I will get by selling customer information to third parties worth jeopardizing my customer relationships over the long run?” In many cases, it will not be.
In the final analysis, I know of several businesses that work just fine without advertisers or people who buy their customer information. But I know of no business without customers! You make the call.