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 / Spring 2011 / Issue 62(originally published by Booz & Company)


The Coming Wave of “Social Apponomics”

Overlaying these elements is trust, without which any company will quickly lose its connection to its customers. By living up to promises, offering generous return policies, avoiding scams and bad-faith encounters, and eliminating exploitive behavior (including the actions of other customers), companies can build consumer confidence and loyalty. The most important factor in creating trust is transparency: Sites such as financial information ag gregator, the New York Times, and Amazon are diligent about explaining policies they have instituted (such as when and why they remove offensive comments and how they use personal information).

The most profitable online retailers have deftly combined the disparate aspects of social apponomics, applying those elements to the unique needs of their business models and customers. For example, Netflix, a US$1.3 billion online movie rental service with more than 15 million subscribers, offers a fully personalized social site where individual recommendations are offered in a wholly transparent way — for example, by showing the logic underlying the choices (“because you enjoyed [a related movie]”) or by displaying ratings of the “members’ average” versus Netflix’s “best guess for you.” In addition, there is a substantial focus on community: Advice is drawn from tens of thousands of customer reviews and top 10 lists. And Netflix subscribers can filter through movie opinions by finding other customers similar to them. Technologically, Netflix takes advantage of the Web’s multimedia and multichannel capabilities by allowing subscribers to watch movies online and on demand and to manage their movie lists through smartphones and other devices. In addition, individuals who learn about films through other online media — such as (the review site) or the New York Times online movie reviews — can add them directly to their Netflix queues via those other sites.

Amazon is the global e-tail leader, with more than $31 billion in sales in the 12 months ended October 2010. The key to its success lies in its personalized customer experiences — a constant flurry of recommendations, related items, and new product ideas — driven by Amazon’s proprietary CRM system that enables cross-selling and up-selling based on real-time sales data and consumer browsing activities. Features include a large and active community that provides trusted customer reviews and a vast marketplace that seamlessly integrates thousands of third-party sellers. Amazon’s wish list feature (allowing users to add products found anywhere on the Web), prime membership (providing unlimited two-day shipping for a yearly fee), and one-click checkout offer maximum ease of use, and mobile access is provided through iPhone and BlackBerry apps as well as through the company’s own Kindle handheld electronic reader.

Amazon is particularly active in developing new capabilities through acquisition of other companies, often buying out emerging social apponomics competitors before they threaten Amazon’s own offerings. In 2009, for example, Amazon purchased Inc., a footwear and apparel e-tailer whose outsized consumer loyalty is a result of its personalized customer experience, its trustworthiness, and transparency built on social media and excellent customer service. Almost 500 Zappos employees, including CEO Tony Hsieh, are active on Twitter, ensuring an ongoing conversation with customers. In addition, Zappos uses existing multimedia sites such as YouTube to facilitate word-of-mouth marketing, and it has created an active internal community with extensive use of blogs, including one on which its senior executives post. (See “At Zappos, Culture Pays,” Dick Richards, s+b, Autumn 2010.)

Intuit, a $3 billion developer of financial and tax preparation software (such as Quicken, TurboTax, and QuickBooks) and related services for small businesses, accountants, and individuals, has built trust through its social domain, where customers can experiment with early versions of new products and services at no cost. This use of the “wisdom of crowds” gives large amounts of real-time feedback directly to developers, enabling rapid improvement of products and services. Intuit has also fostered an active and growing online community through its Leaderboards, which recognize the top 10 current and top 10 all-time contributors, and through, where Intuit brings together local small business and entrepreneur groups. In addition, the Intuit website features specialized information tailored to accountants, women, and educators; a wiki on taxes written and moderated by financial experts; and classified ads.

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