Understanding Customers can be Powerful

It’s pretty easy to see that companies that “get” their customers also get their customers wallets. Take Google as an example. Since it’s IPO, Google’s revenues have soared, particularly relative to it’s closest competition, Yahoo. 70% of people use Google as their search engine of choice. Why? As one user commented on TechCrunch, “Yahoo is a portal for everything. Google is a window for something .” From the get-go, Google forsook flashing advertisements and assaulting clutter to focus on users first… Google _understood_ what users were trying to do and catered to it, and put the priorities of its advertisers and investors second. As you can tell by its market cap, roughly equivalent to that of Yahoo in 2002, that strategy’s been paying off.

Or take Netflix, the original movies-by-mail company. Netflix permanently disrupted the movie rental business by, what I like to call, “leverage of intangible value.” Netflix “got” that a lot of customers hated the hassle of renting movies from rental stores and the frustration of late fees, as well as the customers’ feeling that Blockbuster always had the upper hand in the whole exchange. Netflix also “got” that getting things in the mail can be exciting, and that separating the “chore” of deciding on a movie to watch and the actual watching of the movie could be a net positive on consumers’ mindset. If you look at a typical rental [annualized] relationship, Netflix doesn’t compete on price… people aren’t getting a better “deal” for the most part. Instead, they’re getting better “intangible value”… less hassle, more fun. Netflix growth rate has been phenomenal, and although total earnings are still only maybe a quarter of Blockbusters, market cap is actually now greater, and this is _with_ a copycat program now available from Blockbuster. The market can see, Netflix “gets it.” Blockbuster doesn’t.

Or, of course, the company that pops into everyone’s mind when they think “customer-centric technology”… good old iconic Apple. You could talk about Macs or iPhones just as easily, but lets talk about the iPod. From marketing to packaging to product look and feel to usability design to ancillary services (iTunes) to retail store design you feel yourself in the midst of a synchronized user “experience.” Apple doesn’t build and market innovative consumer products so much as they create novel customer experiences. They “get” first and foremost how these “experiences” fit into customers’ lives. You can see the impact on market cap since the iPod was introduced, dramatically overtaking that of consumer electronics titan Sony.

Other examples that spring to mind of companies that have trounced the competition by “getting” their customers include Walmart vs. Kmart (fun, friendly, campy cheap vs. just makes you feel poor) and craigslist vs. local on-line classifieds (“co-op” style forum…”we’re partners in this” vs. someone else’s way to generate ad revenues). What examples come to your mind?