2010 World Innovation Forum Speaker Andreas Weigend

Interview by Chris Stanley

Andreas Weigend is one of the dynamic minds who played a central role in forging Amazon’s success.  A German with an academic background in cognitive science and behavioural economics, he found his way to Silicon Valley where he became Chief Scientist at Amazon.  Coupling ideas in academia with the needs of the business, he helped forge the customer-centric, measurement-focused ideals on which the company’s success is based.

Recognised as one of the world’s leading specialists in understanding how people behave online, the value of Weigend’s insights can be measured in the number of startups and established firms alike that are clamouring to get the benefit of 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.

People’s growing desire to share their opinions, experiences and aspirations, means business has a huge opportunity to capture, measure and connect all this data and utilize it in the development of a new form of “social marketing”.  “These are the most fundamental changes that have occurred in the world in the past 10 years,” says Weigend. 

In the first installment of this interview (located here), Weigend discussed the “Social Data Revolution” and the potential for businesses to use Web 2.0 to gain and keep customers. Below, Weigend continues his discussion on how marketers can use social data and customer feedback to effectively promote their products and what businesses both on and offline should be doing to survive and thrive in this revolutionary new era.

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.