The fact that the North American economy is driven by consumers should not be news to anyone. When consumer confidence dropped slightly in October, the Dow Jones Industrial average sank by almost half a percent in sympathy. The mall is our universe, our firmament studded with the plastic of credit cards.
Despite the incredible amount of economic clout we all collectively wield, until recently consumers were relatively powerless. News of inferior products or services spread slowly because issues had to reach a critical mass before being picked up by the mainstream media -- spectacularly awful and multitudinous things had to happen first. Remember the 80s, when giant soft drink bottles started exploding and lodging hunks of glass in tracheas? How many months and incidents passed before awareness to become high enough for the story to be picked up and the containers recalled?
Then came the Internet. Or, more properly, then came broadband. Those months turned into days and sometimes just hours. The availability of high-speed Internet access is directly linked to the widespread adoption of things like blogs and sites like YouTube Inc. and Facebook (Nasdaq: FB), all Web-based "Web 2.0" or "social media" communications tools that allow people to create and post content and share it with anyone else who is online -- instantly.
These channels have given individual consumers audible voices for the first time by democratizing the distribution of information (i.e., you no longer needed a radio or TV station, just a computer and a modem, to tell the world what you had for lunch). Even though these voices are small, they’re networked, which means they can quickly grow into a single big, loud one.
Noise is one thing, but what about credibility? These words (our words) have a lot of authority with other consumers. A Nielsen Global Survey released in October showed that 66 percent of North Americans consider blogs and other forms of user-generated content (UGC) as reliable sources, and, most significantly, that 78 percent trust personal recommendations, or "word of mouth." Drivers for the use of social media include the desire to communicate and form relationships with other, like-minded individuals. Web 2.0 has therefore been described as "word of mouth on steroids."
Negative is the new positive
Probably one of the best known examples of the power of this swelling chorus of consumer-generated content is the now-famous "Dell Hell" blog, written by Jeff Jarvis. Annoyed at the performance of the new computer he had purchased and that his subsequent customer service experiences were less than adequate, Jarvis started blogging his frustrations in 2005.
Thousands joined in his song of complaint, and Dell Hell posts soon dominated Dell-related Google search results, damaging the firm’s brand and reputation significantly. In an open letter, Jarvis eventually called on Dell Inc. to pay attention to what their customers were saying and start participating in the online conversation.
CEO Michael Dell appeared to take Jarvis’s advice. Over the next 18 months, the company launched a blog and a collaborative site called Dell IdeaStorm that encourages consumers to provide the company with feedback. The business intelligence gathered as a result of engaging in a dialogue with its consumers has helped Dell improve its customer service process (obviously a great source of dissatisfaction) and also provided valuable insight into product development and other opportunities for innovation that would never have come to the company’s attention otherwise.
Coming full circle, the whole saga was summarized in a recent article, written by Jarvis, in which be praised the firm for undertaking a fundamental shift in the way it relates to and works with its customers.
If Dell had not had such a negative experience, would the firm have been motivated to set up these programs? Probably not, meaning the opportunities and potential for competitive advantage generated by actually listening to its customers would likely never have materialized, or it would have been been reaped by the competition instead.
The economy has always been consumer-driven, but social media has flattened the communications playing field. Not only can the biggest companies in the world tap into what their customers are saying, but more importantly, we can also hear each other.
— Maggie Fox, Founder of Social Media Group