The Internet is not kind to many brands because the Internet makes it possible for customers to punish companies which violate their trust.
This happens to companies of all sizes. Design flaws in Microsoft’s Xbox 360 system are known for triggering the “red ring of death” permanent system failure. A Google search reveals that for every 6 mentions of “Xbox 360″, there is 1 mention of the “red ring of death”! That’s an incredibly high liability and probably one reason why Microsoft has had to pay out over $1 billion in warranty claims on the system! I’ve also been consulting lately for a small local company who believe that their service is “best in class” but the crowd on Yelp gives them a mere 3-stars. If a $200 billion and $20 million company can both be out of touch, the root cause of denial cannot be size it must be overconfidence in success. That such a trait exists in companies isn’t surprising, it exists in people too: 85% of MBAs believe that they have above-average GPAs.
The power of punishment is nothing new. Economists who view the world as comprised of entirely selfish individuals tend to predict extensive free riding and non-cooperation as the dominant strategy for Prisoner’s Dilemma games. But add the possibility of being punished or punishing others who misbehave and behavior becomes much more cooperative and “altruistic.”
In one famous experiment, behavioral economist Ernst Fehr gave individuals $20 and asked them to play the “dictator game” choosing whether to divide the money 50/50 between themselves and a stranger or the more selfish 60/40 split. Participants chose each split roughly equally. But then Fehr found his ‘aha’ insight after he then divided the parties into two groups to play a second round. One group, Pigs, had chosen the selfish 60/40 split and the other, Saints, chose the 50/50 split. Then he re-ran the experiment with Pigs and Saints on the receiving end and a new subject who was informed of each party’s prior behavior doing the dictating. The result was that overwhelmingly, Pigs got the shaft and Saints got an even-split. In other words, subjects were willing to pay money to punish a stranger.
This result has been repeated over and over again in many variations which confirm that people will pay to punish others even when it doesn’t seem “rational” to do so. Marketing studies confirm that customers are willing to switch to a more inconveniently located convenience store or retail bank if they feel wronged.
The link which marketers must form between the Internet and punishment was identified in 1999 by the Cluetrain Manifesto:
- Markets are conversations
- Markets consist of human beings, not demographic sectors.
- Conversations amongst human beings sound human. They are conducted in a human voice.
- Whether delivering information, opinions, perspectives, dissenting arguments or humorous asides, the human voice is typically open, natural, uncontrived.
- People recognize each other as such from the sound of this voice.
- The Internet is enabling conversations among human beings that were simply not possible in the era of mass media.
Today, we are seeing this. The question is whether marketers are feeling it. I’m seeing a lot of buzz about social media which consists of planting Facebook, Twitter and YouTube veneers on traditional advertising methodologies. But these are insufficient because open information means that marketing has changed. It cannot be content with broadcasting a few well-defined product messages out of the corporate black box. Marketing needs to lead a charge in screaming that markets are conversations which can potentially reach back into every dark corner of the corporation. But these conversations are also opportunities to show your humanity, empathy and appreciation of your customers.
I hope to see more companies think fundamentally about “Internet marketing” and the shift that it has brought towards making conversation a business requirement at the CEO level.
