What kind of online marketing strategy makes the most of digital media? One very intriguing answer, from the proprietor of the digital marketing and design agency Huge, is the embrace of software experience. To Aaron Shapiro, companies don’t thrive by selling products or services anymore. They thrive by creating immersive experiences where people go to get their problems solved or their aspirations realized.
In his book, Users, Not Customers: Who Really Determines the Success of Your Business (Portfolio/Penguin, 2011), Shapiro offers the example of JetBlue’s website: “bargain fares in a large font on the home page, an easy-to-use flight booking tool that catered to new users but also let advanced users jump right in, and a new online baggage-check option that became extremely popular.” He also points to the Gap, the Weather Channel, Nutrisystem, and Walmart as companies that have invested heavily in simple digital environments where people can easily get what they want. The solution is first; the product or service is secondary. Most valuable of all is the ability to skip all the time-wasting, enervating detritus of shopping; to be confident that you are being directed straightaway to a better end result than you could find offline.
Hence the book title. “Customers,” he argues, are people to whom products are sold. For “users,” the company itself is the product. It’s a bit like having the company as your concierge, except that instead of a harried individual behind a hotel desk, the company meets you through (ideally) a well-designed online (and sometimes bricks-and-mortar) interface. We met with Shapiro in early 2012 in s+b’s New York offices to talk about the nature of this approach and its implications for marketing — and the rest of a company’s leadership.
S+B: How did you land on this concept of users being different from customers?
SHAPIRO: It started with our work at Huge. We’re an independent agency within the Interpublic Group [of Companies]; the main focus is full-service digital solutions for clients like Target, Pepsi, Ikea, General Electric, and Royal Caribbean cruises. We found that companies were hiring us for seemingly very practical things. We’d get a call saying, “We need to do a social media campaign” or “We need a website” or “We need a mobile device site.” But it would turn out that they were really looking for a brand transformation. They saw the businesses that they had built up very successfully over the years being hit with a digital tsunami, and realized that they’d have to reorient their entire company to be successful online.
S+B: What do you mean by brand transformation?
SHAPIRO: If you think about the history of brands since World War II, most of them were fundamentally built through storytelling. A 30-second ad would blast out a narrative for a passive audience. But on the Web, consumers are not a captive audience, so marketers need a very different approach.
People are interested in utility. When users go online, in particular, they are very task-oriented. They want to check the news, read their e-mail, or book a flight. To be sure, they want to feel good about what they buy, and they’re still looking for a connection. But they will only respond to a marketing message they think is relevant. They’re not a passive audience that will buy something after seeing a story.
S+B: So customers are passive and users are active?
SHAPIRO: I would put it differently. Users are people who interact with your company in the digital space — on your website, by e-mail, or on Facebook or Twitter. Customers are a subset of them. You could be a user of Amazon and never buy a product; you would just go to its site to read reviews, apply for a job, or publish a book. When companies focus on fulfilling the needs of this broader group of users, they are much more successful than if they just serve customers.
S+B: For a typical consumer packaged goods company, is this true? Don’t the majority of customers go to the store, pick up a bottle of cola or bleach, and never become website users at all?
SHAPIRO: There is certainly a large segment of that type of customer; TV is not going away. But the percentage is declining over time. In 2011, according to Forrester Research, 50 percent of all consumer sales involved an Internet experience. The big change is the number of people who use digital as their primary point of reference for making decisions and learning about brands. They research a product online before they buy it, or buy it online directly. There is no such thing as an offline business anymore.
Think about your own behavior: How many things outside of impulse purchases have you bought that you haven’t researched online first? If you’re typical, that’s a smaller and smaller number.
S+B: In many cases, I start to look online until I discover there are too many choices and it’s too confusing. So I go to a store.
SHAPIRO: I’m not suggesting that stores are going away. But note if you had found a site with the requisite simplicity and selection, a site that really understood how to make the decision simple and yet appropriate for you, you would have stayed there. If you look at the behavior of the digital generation, those under 25 — and we’ve done a lot of research on this at Huge — you see that digital is far and away the preferred way of doing everything. Having to go offline is viewed as an annoyance. Now fast-forward five years to when those people are in their late 20s and early 30s, starting families, a target demographic. The movement online will be a larger tectonic shift than anything we’ve seen so far.
S+B: What implications does this have for marketers?
SHAPIRO: Today, a company effectively needs two businesses to succeed: the core business it’s always been in, and a digital wrapper that meets user needs online. This means companies have to think of themselves as software businesses, competing in the digital sphere with Google and Amazon. They have to create a software layer around their whole company, where all their constituents and stakeholders will interact with them.
The best strategy is to be a filter. Since there is an overload of information everywhere, users tend to rely on trusted sources of knowledge. The filter is the first place you go for a specific interest: Amazon for books, electronics, and e-commerce; CNN for headline news; Kayak for travel searches; and eBay for used products, for example. These are the new intermediaries; consumers trust these entities to curate the massive amount of information down to just what is relevant. Facebook and peer recommendations represent another very effective kind of filter to narrow things down.
Your thinking must shift in a lot of ways. For example, in a world of one-on-one salespeople, with lots of different stores, it was easy to have different price points. But now, pricing is transparent everywhere. You can’t differentiate as easily among customers or geographic regions. We have one customer that sold essentially the same product for years to consumers and businesses at different price points. The two variants were manufactured and warehoused at different locations. Now everyone knows how similar they are, and the company has to fix it, which means overhauling its entire supply chain.
S+B: Can’t you differentiate prices in other ways? For instance, can’t you emulate the airlines, which price seats on the basis of demand?
SHAPIRO: Certainly, for that specific business. But services are emerging that predict whether prices will go up or down, based on historical data. It’s only a matter of time before most time-sensitive pricing differentiation will go away.
We see a similarly broad shift with social media. Most marketing firms are command-and-control organizations, where every decision goes up 50 layers to get approved. But tweets and blogs require speed. We’ve seen situations where someone posts a complaint online about a client company, and it takes the company 36 hours to manage the response through legal and marketing. Because no one responds quickly, it becomes a major communications crisis.
To be effective in social media, you have to empower junior people to be brand ambassadors, to communicate online rapidly. That seemingly tactical, small move can lead to massive organizational shifts. Somebody 20 levels down in the hierarchy who’s responding to a tweet has to know and understand the whole company’s strategy around things like pricing and social responsibility. There has to be a tremendous amount of training and a very big cultural shift.
S+B: How should companies manage the risks in all this online openness — for instance, risks involving legal liabilities or leaks of intellectual property?
SHAPIRO: There are a lot of issues, especially in industries like financial services or pharmaceuticals. Eventually some of the regulatory rules may have to evolve; for instance, if a junior employee spontaneously tweets that a drug could be good for a non-approved medical problem, how much leniency should there be? That’s a tricky question, and it’s one reason pharma companies have been relatively slow to adopt social media.
On intellectual capital, only a few companies — Apple and Amazon, for example — have successfully kept technological information locked down. Most companies hope that the speed of innovation exceeds the risk of leaking information to competitors.
S+B: Do you think businesspeople are prepared for the kinds of changes required by the Internet?
SHAPIRO: Some companies are still being caught flat-footed. Look at the success of personal financial services like Mint.com and Simple.com, an online bank with a very simple website that is like what every consumer wants his or her bank to be. Why does it take a startup to do it correctly? It’s only a matter of time before these incumbent retail banks wake up and see that half of their capital is going elsewhere.
But other companies are learning. In 2009, two Domino’s workers videoed themselves contaminating the food; the video went viral. This led to a lot of Internet traffic about the substandard quality of the chain’s food. So the company’s new CEO apologized. Domino’s put up a website called pizzaturnaround.com and reworked the recipe; sales went through the roof, and net income jumped almost 11 percent in one quarter. Two years later, Domino’s still runs ads about how much better its food is than it used to be. When you embrace the digital ethos, consumers respond.
- Art Kleiner is editor-in-chief of strategy+business.