Exclusive interview with Amazon's former Chief Scientist Andreas Weigend
In a world where online businesses regularly burst into the public consciousness, and then just as regularly fall away into oblivion, one company has consistently endured. With a restless, innovative spirit, Amazon has repeatedly embraced new opportunities afforded by the rapid evolution of web technology. It has become a model for how business can leverage the power of web 2.0 and beyond, to market to and communicate with customers in ways that were previously unheard of.
Andreas Weigend, born in Germany, came to the US to pursue a doctorate in physics from Stanford, and post-graduate studies in cognitive science and behavioural economics. As Amazon's Chief Scientist he coupled academic rigour with business reality to help forge Amazon's customer-centric, measurement-focused culture..
Recognised as one of the world's leading specialists in understanding how people behave online, the value of Weigend's insights can be measured by the number of startups and established firms that are clamouring for the competitive edge afforded by his research and experience. Alibaba, Best Buy, Lufthansa, MySpace, and Nokia are just a few of the companies who have benefited from his acumen and understanding.
Speaking exclusively to HSM, Weigend offers insights into how our behaviour and expectations are being shaped by the web, and what businesses both on and offline should be doing to survive and thrive in this revolutionary new era.
Andreas, how do you assess Amazon's impact on the world of business?
When people ask me for advice, I usually tell them to simply copy Amazon. Most of what you see there has been tested against alternatives. Companies of course need to differentiate, but if your company is online, once you start tuning the performance, you are likely to end up with something that is more similar to Amazon than what you started with.
Amazon pioneered powerful concepts in online retail that have profoundly affected the way consumers shop – concepts that we now take for granted. Examples include recommender systems to help consumers discover items, wish lists to express intent, and user-created reviews. Amazon is always trying to delight the customer, in both the short term and long term. They analyse, not just the transactions, but also the interactions involved in the decision-making process. This data strategy element is a key driver that will carry Amazon into the future
OK – so let's talk about data. Why do you believe that it's such a critical element for those companies who want to be successful?
First, it's actually not just the data that is important … it is data and metrics. We are now able to measure many things on a very fine scale. In a traditional, physical store, you can browse without anyone really knowing what you are looking for. In contrast, on any website, you need to click somewhere to proceed. Knowing all the customer's interactions, not just their final transactions, enables a big shift in mind set compared to traditional retail.
We have the privilege of living in that one time when the world got connected. FIrst WE connected computers, then connected people (think Facebook). Now, the frontier has moved to connecting data, and that's the Social Data Revolution.
So tell me a little bit about this concept of the Social Data Revolution and its impact on business…
So far, we have mainly discussed passively contributed, implicit data. What has changed in the last few years is that, in addition to this passive data, people have started to actively contribute data – people share their situations, people share their interests, people share their relationships. So we wind up with data both about themselves, and about their relationships to other people.
This is extraordinarily important for marketing, because people now have a way to express what they might be interested in, and the social element in marketing – word of mouth, asking your friends what they have bought – is a very important driver. Experiments and surveys typically show that social marketing is between five and ten times more effective than other forms of marketing.
An early example of this social marketing would be Amazon's "Share the Love" scheme, where, upon check out, you are asked whether there is anybody who might be interested in buying a copy of the same book you just bought. As an incentive, you get 10% credit and they get 10% discount if they actually buy the book within a week- and most people think this is fair.
How should marketers be using all this data that is being generated?
One of the most important differentiators between traditional marketing and Web 2.0 marketing is the use of the web for marketing and feedback, both for physical and for digital products. This information can be found equally easily by consumers and company employees. At one of my consulting engagements with Nokia, we realized that most people interested in their products do not go to Nokia's own site: Google's algorithm did not put Nokia's site on the first page of its search results. Airlines are another beautiful example. Flatseats.com describes the pros and cons of business and first class seats across airlines and aircrafts, via people contributing this out of their goodwill and passion. Whether you make phones or fly airplanes, finding out what people are saying about you on the web is a great and inexpensive start.
There is a lot of scepticism about how sites such as Facebook can be used by businesses to actually make money… What's your view?
Last year, working with Lufthansa on social marketing opportunities, we spent a few hours with Facebook executives. It seems that most people, when on Facebook, are not in the mindset to buy things. For them, Facebook is a communication tool. Many companies are exploring Facebook and Twitter, trying to see how they can reach consumers, We are still at the very beginning, where many different things get tried, but we don't really have a good business model yet.
On the other hand, Dell sold about $1,000,000 worth of computer equipment by having special sales that were announced through Twitter. So companies experiment, and the shift is much deeper than most people think.
Now everybody has become a marketer. If I love a product, I will tweet my friends about it, The decision making process is hugely influenced by what other people think. Think about the last ten items you bought, and just reflect on what percentage of influence came from your friends, your peers, and the web, and what percentage came from a salesperson, or came from marketing. You'll be surprised how small the traditional marketing component is.
How has web 2.0 affected customer expectations?
To me, Web 2.0 means architectures of participation. Amazon did an experiment removing reviews, and found that the first review is worth between $30 and $40. If people don't see any reviews for an item, they are less likely to buy it. People are looking for affirmation.
One of Amazon's brilliant features is "people who click on this item eventually bought that item." Now you feel safe in this otherwise insecure world of online commerce. If 86% of customers bought that item, you can't be all that wrong! Customers expect support for their decision making, like stuff written by other people similar to them, in their situation, and maybe a step ahead of them. This is the de facto force in how people now make decisions. Not via glossy brochures written by the company.
How do I start connecting with people on the web, how do I get people to start talking about my company on the web – how do small and medium sized businesses start generating a critical mass of interest?
The good thing is that people write about what they want to write about. So, if you do a really great job, or you do a really awful job, people will give you their attention, and Google will rank these entries high – Google is very positive towards user generated content. On the other hand, if there is nothing really to be said, then nobody will bother. If people care they will talk, and if they don't care you can't get them to talk.
Tips – Start Improving Your Online Marketing Today
• Spend an hour Googling yourself, and get a feeling for what the world really says about you. It's often eye opening.
• Don't worry too much about collecting all the data; first think about what actions you can take. Don't worry about making the right decision up front. Avoid analysis paralysis. Instead, think about two or three reasonable things you could do, do them, and then immediately measure what works and what doesn't work
• Don't worry about Second Life, Facebook, Twitter, and the latest trends, but rather about the expectations consumers have for the data they create – namely, that they want to get value for themselves, within half an hour, not half a year, and that they are willing to contribute data to reach that goal.
You described the Social Data Revolution as "people sharing information that allows marketers to reach them much more effectively than before." Why are people sharing this information?
I did a survey with Facebook, where we tried to understand why people actually contribute. It's a broad set of reasons. One is that people like to get attention, and they know that if they give attention, they will get attention later. So if I comment on your blog entry, chances are you will comment on mine. The second is that many people just have time to kill and now, with communication costs basically at zero, they do that in public, as opposed to playing games on their PC privately as they did beforehand. This is another important point: what used to be private has now moved into the public. Lots of things, like what you had for breakfast, you would not be able to communicate with the world. Now millions of people communicate that information everyday.
What's the role for traditional marketing departments in leveraging all of this social data?
Let's take a look at the traditional 4 Ps of marketing – product, pricing, placement and promotion.
First of all, marketing departments traditionally had only very limited access to customer feedback, especially in real time. In contrast, Amazon.com put at the bottom of every single page a feedback form – where people can jot down if an image loads too slowly if there's a spelling mistake, etc. So you basically have a million people a day debugging your site. That feedback loop in product marketing is a dream for anybody who is in that world. Unless you have a product which is not very good - that of course is your worst nightmare. This transparency that has been created, companies have no choice but to listen to it. If they don't, their competition will.
The second one is pricing. I believe that the price of an item is probably less important than many companies think. Other elements, such as do they trust the web site, what is the customer service like, etc., are becoming more and more important for customers. Traditionally you knew the price but you didn't know anything about the customer service. Now that information is out in the open and it will be very interesting to see how much of a premium a company can charge if they have five star customer service.
Placement now has two elements. One relates to people's stated preferences: people share data about their intentions and we can place the products for them at that point in time. The example of this is Google's Adwords, a search product that shows an ad in response to your search terms. The second element to placement is when you have not stated a preference, but when it's possible to infer what somebody's interests are. The example of this is Google's AdSense, which offers contextual advertising. Whilst Google doesn't really know what your intentions are, it does know where your attention is – what page you are at, what you are paying attention to. It infers indirectly through this revealed preference that these might be ads that could be of interest to you.
And finally promotion. The mass media invented the mass customer - unidirectional broadcasting, with almost no fine granularity. What is very different now is that the granularity is often on the level of the individual. This affects how products are promoted. Here I make the distinction between 2 dimensions. The first one is promotions from companies to people – the ten-year-old idea of one-to-one marketing and the idea that companies really understand what they should be promoting to you, the individual consumer. That is different to the traditional mass-market promotion, but is still based on old style variables of market size, segment size, target size etc. What's new on the promotion side is the virality aspect or the social aspect.
Whilst many people will have heard about one-to-one marketing, I am personally neutral about it – I haven't seen it work greatly. On the other hand, the virality aspect, where the customer acquisition cost is zero, that is something that has changed the world – things like Facebook wouldn't exist without that viral loop. .
What should companies be doing to meet the new expectations of customers in the Web 2.0 era?
"Customer service is the new marketing." This is actually the slogan of a company here in San Francisco called GetSatisfaction.com which is a new way of doing customer service. Let me start with the old one – traditionally you send emails or you call to a call centre, and the knowledge that you created when your problem gets resolved disappears inside the company. So the next user still has to call the call centre or email customer relations.
What Get Satisfaction is doing is providing a neutral platform where people can post problems that they have with a service. Whilst there are employees, representatives of these companies sitting and monitoring what people's problems are, anybody else can actually respond and solve problems. So you often have customers solving the problems of other customers. All this is out in the public. Chances are you aren't the first person to have that problem and you can just look up what the solution was.
I was at Best Buy last year and the whole company calls itself a wiki – it has a slogan of "the company as wiki". Because they realised that by tapping first into the 130,000 employees they have, and then second into the millions of consumers they have, they can do a much better job in describing things and recommending things than the couple of employees they would have in core marketing. It is very impressive to see how a major company has redefined its attitude towards control and towards information.
The people who are leaving comments on the web – don't they reflect a niche – younger more tech savvy, that isn't necessarily reflective of society as a whole?
Yes, we have to distinguish between the contributors of information and the readers. But I don't think the contributors are only young people, it also tends to be males in their 40s (on Wikipedia, for example). It is, however, a minority of people. But it is still the case that the majority of people do use what they find as the top hits on Yahoo and Google in their decision process. Although not many people write hotel reviews, many people read hotel reviews.
This is having an impact on businesses which didn't use to be all that transparent, that used to rely on the brand. For example, whereas we might have said "oh I'm staying at the Hilton, it can't be all that bad" we can now see that the difference between one Hilton and another is often much bigger than the difference between one Hilton and a hotel from another chain.
How do you effectively get people's attention and connect with them when they are bombarded constantly with information?
Firstly, companies have to realise that while the dominant cost used to be the cost of sending something out, that is no longer the case. Sending out information is cheap. Now, the cost is on the consumer. For instance, the cost of annoying the customer becomes important. United Airlines sends me every other week a credit card solicitation. Now I have had my United Airlines credit card for about twenty years. At some stage, I lose my respect. How is this possible that they don't know that the person they send the solicitation to actually has a card? So respect I think is becoming a key concept for companies. If people unsubscribe from something like an email list, that is something which companies should very carefully take note of. The cost of an unsubscribe is often way more important for the company than the cost of creating an email.
Consumers rarely express their frustration, so companies have to listen to those acts of expression (unsubscribe being one example). However, customers do share stuff, they'll forward things. That again refers back to social data – you get an offer and you share it with a friend as in word of mouth or viral marketing – which you should carefully measure in order to understand what people actually appreciate.
So how do you get people's attention? Via their friends, not via interrupt marketing. That's what I refer to when I talk about social marketing.
Isn't there a danger of companies abusing information that people feel they are exchanging in a social setting by using that data to try to sell to them?
The good thing is that if a company abuses people's data, it doesn't go unnoticed. For instance, an insurance company on the East Coast [of the US], had a claim from a girl for anorexia last year. They went and got all her Facebook and MySpace messages in order to make the claim against her. That was written up in The Economist. So the good thing is that companies who try to abuse data or misappropriate it get in trouble for it. That transparency should keep people on the right track because otherwise negative feedback will happen.
Let's look to the future – what will web 3.0 look like?
I gave a talk three years ago on web 3.0 and I defined it as interaction. Web 2.0 is about participation, but not necessarily people interacting. We are already seeing this – Facebook for example. The new one will be the collective or the community. Collective intelligence is really building on what others have. I don't know yet how this collective intelligence aspect will play out, but that is where I would expect the next significant shift to be. Frankly, right now, most of the information that people put up on Facebook or Twitter is pretty useless.
http://us.hsmglobal.com/notas/52377-exclusive-interview-with-amazons-former-chief-scientist-andreas-weigend
Windows 7: simplificá tus tareas cotidianas. Encontrá el equipo adecuado para vos.
No hay comentarios:
Publicar un comentario