Increasing Customer Transparency: Real Threat or a Paper Tiger for Marketers?

A professional friend and marketer just posed a very interesting question: doesn’t Twitter make it easier for competitors to poach customers? Citing this post, she asked: “Isn’t it dangerous to display your customer relationships in social networks because competitors will ‘steal’ your customer list?”  Thanks to her, I’ll take this opportunity to explain the issues behind the question and how to increase transparency without compromising competitiveness in your business.

Transparency: What It Changes, What It Doesn’t

Most businesses have traditionally kept their customer relationships close to their vests because, in competitors’ hands, a customer list can serve as valuable market research. After all, it’s a collection of people who have a certain need and pay to meet it. It can be a blueprint for stealing customers. True, in a B2C situation, your competitor could watch your store and see who your customers are, but it doesn’t pay economically because the information is too expensive to get and act on. Digital information, on the other hand, is unquestionably more actionable. Twitter and other digital venues make people very accessible. There is no question that transparency is changing the cost of finding and interacting with people. So this is the problem that presents itself, but I’ll show that it’s not a problem in itself, although it reflects a much deeper issue.

Increased transparency confronts businesses with their value propositions because customers have better information, which can significantly reduce changing costs. However, Web 2.0’s increased transparency actually changes very little: if you have a substantial part of your business from customers due to high changing costs, you have a weak business. You want your customers to be there because you are the best in their eyes (i.e. your unique selling proposition {USP} fits their unique buying need {UBN}). Any economist will tell you that markets become more efficient when pricing and feature communication  increases (transparency). Therefore, the right customers will find the right providers more easily. For many businesses, though, this will mean disruption and adjustment. The good news is, opportunity and threat move together, and the businesses that understand this shift and act on it first can grab the advantage.

In Practice

Now let’s return to the original question: Doesn’t following customers on Twitter, thus encouraging them to follow you, make them more vulnerable to being poached?

• Yes, your customers with whom you have weak relationships or suboptimal fits are more vulnerable because competitors can see the conversations and contact them
• No, customers whose needs you satisfy based on a valid USP won’t go anywhere; actually, contact with competitors can make them love you more when the fit is right
• No, in your Twitter following, you will have customers mixed with non-customers, so it’s really not a “customer list” anyway
• And, if your competitors are communicating with their customers on Twitter, the same holds true for you; the more you communicate according to your USP, the easier it is for all people with the right UBN to find you
• Net-net, communicating with customers on Twitter is neutral, but the firms that conduct themselves in an authentic way, according to their USPs will have the advantage
• No business can affect Web 2.0-inspired transparency, it’s now a fact of life, so I advise all businesses to start the work of rebalancing their client portfolios
• Besides, customers don’t belong to any company, anyway!

Healthy Adaptive Behaviors

• Realize that, because increased transparency affects everyone, and people in general don’t like to change, it won’t affect most businesses overnight; companies that have to worry most are in commodity businesses where price is king and loyalty low
• Communicating with stakeholders (customers plus employees, regulators, partners, competitors, media…) in transparent environments is a new skillset for everybody, and many people require significant time to get “fluent” (as in language)
• You need to get out there and start learning; make your mistakes now, when people don’t know what to expect; later, it will become much more competitive and unforgiving
• Do serious work around your USP, and study customer UBNs; subsegment relentlessly because the niche is becoming more powerful every quarter; for more on this, see How Social Networks Change the Rules of Business Development and Profit and Realizing Value from Social Networks: A Life Cycle Model
• Face this painful realization: although most executives would say that they are customer-focused, if you ask their customers, you would receive a different answer
• Use this to your advantage: increased transparency via digital word of mouth will force businesses to realign themselves with customers; now customers mirror each other and strengthen their perceptions of experience; this is a painful and scary realization for many businesses; make this happen in your business faster than competitors, most of whom will try to hold onto “the way things used to be”
• More on this in Consumer Empowerment—A Rare Innovation Opportunity

What do you think? What are your experiences so far?