On feedback as a fundamental of economics: Part four – Web 2.0, the firm and its customers in the 21st Century

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Well I keep promising to explain the neurological foundations of homo dialecticus in Adam Smith’s Theory of Moral Sentiments but then there keep being things that the previous post requires as a follow up. A couple of posts ago in this series I discussed feedback within the firm and its growing importance – and the fact that eliciting it well seems as much a social as a technical thing.

That post and the one that followed it – on how much more we value the interactivity that communications mediums – from the penny post to the internet – than we value their ability to deliver ‘content’ in one direction from a provider to a consumer. Two related things seem to suggest themselves directly from these two posts.

Web 2.0 represents the development of the internet away from simple delivery of content and into all kinds of hyper-interactivity. Thus the premier Web 2.0 app Google indexes the interactions on the web to provide us with better filtering of what is and is not worthwhile information. How did Google know that the graphic I’ve used would be more useful to me than the graphic it listed at number 2,880,000 when I typed iin “Web 2.0”. Well with a heap of tricks devoted to working out what others think – by promoting the most linked to images and also by making each previous click through to an image on previous similar searches a vote of confidence in the ‘clicked on’ image.

Amazon does much the same in the book world, enabling consumers to build the value of the content they consume – like Google. The firm becomes the integrator and orchestrator of its own customers’ knowledge which has far more value in this feedback enriched aggregated state than it has for them on their own.

There are the social networking sites. And so on it goes. Just as a few large Japanese firms pioneered new ways of listening to the customer – and taking their concerns seriously so firms today are trying to harness Web 2.0 to listen more carefully to their customers. That is they’re trying to harness the value that might emerge from better feedback.

Dell is trying to listen to its customers with idea storm a website where their customers can design products – and certainly interact with Dell to indicate their preferences. I’m not sure how much of it is spin, but I gather from the prominence they’re giving it and from the content of the site that they’re trying quite hard to make it more than that.

This net survey and a recent Age survey of Web 2.0 tell us about the Australian Web 2.0 application Tangler an application I’ve had a squiz at and liked it – the demo video is here though the link was slow for me.

According to Martin Wells, the chief executive officer of the Australian web 2.0 software developer Tangler, many large corporations . . . don’t see this as really opening a channel of conversation for users, or tapping in to the creativity and passions of users and how loyal they are,” Mr Wells says. “They just see this as another medium. Some 2.0 technologies will get into enterprises this year, but I don’t think the actual 2.0 spirit that’s behind it. It will take a number of years before that is taken advantage of by the enterprise.”

Tangler’s product, which is still in testing, is a web-based service for enabling website visitors to to communicate with each other. Hence, a company can quickly create a community from its users and learn from their discussions.

From the same article we learn that Kimberly-Clark is giving Web 2.0 a try. Pardon the cliche but they’re trying to empower their customers.

Consumer goods manufacturer Kimberly-Clark is another to test some of the concepts around web 2.0. The company has made extensive use of its website to solicit feedback relating to its Huggies disposable nappies. The company has used online forums since 2002, which now include 19,000 members in Australia and New Zealand.

According to Lisa Liaros, senior brand manager for Huggies, , the forum was established to give parents a form of communication and support with each other that was available at any time.

“It is a safe space where any question can be asked and answered by other parents and carers,” Ms Liaros says. “We often ask mums their thoughts on new products and ideas and have recruited mums to test and trial products as needed.

Ms Liaros says that the parenting forums have become an integral part of Huggies’ marketing mix, with more than 600,000 posts since it was launched, and the company’s experts are now receiving more than 100 questions a month.

Of course as Ms Liaros says perkily the benefits to Kimberly Clark are marketing ones. It “hopefully builds loyalty to Huggies products”. But it’s also an important source of feedback from customers and as the above quote makes clear, there’s added value in the contact it facilitates entirely between customers themselves.

This may not excite you, but then we’re dealing with nappies. You’ve probably left nappies behind. Well perhaps not forever. Well designed nappies are important for those who wear them and those who care for those who wear them.

But there’s something else you might wonder? Why Kimberly-Clark and Huggies? Why not others? I think there’s a clue as to why in this comment from our friend at Tangler.

However, according to Tangler’s marketing director Mick Liubinskas, these benefits [mentioned above] can be swamped by concerns over the increasing level of regulation under which companies find themselves working, and the risk-averse legal perspective this engenders. Hence, they stick with traditional methods of reaching consumers, even though consumer audiences are fragmenting, thanks in part to blogs and podcasts.

“So they keep chasing the users wherever they go, and the users are running away because they are sick of the corporates yelling at them,” Mr Liubinskas says. “So from a marketing perspective there is going to be a continued mess for a while.”

You see if you are supplying a car or other sophisticated equipment and you deploy Web 2.0 to maximise feedback, what if someone comes along and tells you that there’s some way you could improve the safety of your car. Some bolt is sticking out say. That gives you a pretty big problem. Unless and until you fix it, will you be liable for anyone who hurts themself on that bolt?

A while back I was engaged in some brainstorming with a major pharmaceutical company and I suggested that they start their own user groups. I suggested to them that user groups for different drugs were bound to start anyway – and no doubt have – so why not welcome them.

They seemed intrigued, but I knew that there was no chance of this happenning. With lines of accountability stretching all the way back to headquarters, something like that would pose huge risks for the company. Indeed it’s hard to imagine a policy intervention that would solve the problem. Of course we could (and should) change our own law to protect and indeed to assist such companies do this kind of thing – we should adopt a more economically savvy approach to negligence in which doing this kind of thing could be seen to count for rather than against a company. But even that wouldn’t do much good because things that become known on user group here could easily become the subject of liability elsewhere.

But I think you can see how valuable fostering this kind of feedback could be. We live in exciting times.

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Paul Frijters
Paul Frijters
14 years ago

My economist training wants to translate all these buzzwords into entities I can understand: producers, intermediaries, and consumers.
When you talk about ‘content’ you seem to mean products that are made by a firm or at least a group of people anonymous to the end consumers. These can then be sold online as they could have previouslt been sold in a shop. For instance movies on demand.
When you talk about ‘communication’ you seem to mean small service products (gossip, family information, chats) that are produced by individual consumers and are sold without price to other consumers using the net as an intermediary for a small charge. Email for instance.
When you say hyperinteractivity you seem to mean the production of a new service by a firm or group of people anonymous to the end consumers that entails some shares aspect of the choices of other consumers – be it their purchasing choice of various nanonymous services or their purchasing behaviour of unpriced services. For instance Google and web 2.0.
And then you say hyperinteractivity is exciting and opening up many new products. Maybe. At least I think I begin to understand what you might be saying.

Dave Bath
14 years ago

The push in Web 2.0 (as far as W3C folks were concerned) was to use ontology, semantics and metadata to allow inferences, rather than a mere increase in the number of dumb links.

It’s the same fight as with “Web 1.0” where the technically literate loved the markup that defined sense/substance (dl = here is a definition list, em = emphasised) but the masses blew all this away by using physical, not logical markup.

This will be just another lost opportunity.

If businesses want to get the full benefits of Web 2.0, start paying attention to metadata, and have a proper set of terms and definitions to define the objects and procedures within your business.

As Confucious said: “Rectify the language, and everything is possible. Fail to rectify the language, and nothing is possible.”