RE: Marketing, Innovation and the Creation of Customers

by Chris Kenton on September 9, 2009

This post is a response to a fascinating post by the remarkably thoughtful Venkatesh Rao at RibbonFarm. Trying to summarize his post would take an entire post in itself, so I’m simply going to respond and see where the conversation goes.

My only quibble with Venkat’s post is the description of marketing as inherently a numbers game, “by definition”. My argument is that we have distilled marketing into a numbers game because that’s a convenient way to reduce perceived uncertainty and market risk. The reason marketing and engineering look so much alike is that businesses have ~made~ marketing more like engineering, because engineering customers with the efficiency of a machine is far more attractive to the numbers-oriented inmates running the corporate asylum. The average marketing executive answers far more to the CFO these days than they do to customers.

The problem with the marketing funnel as the defining metaphor for marketing is that it’s a machine of efficiency, not effectiveness. It’s like a speedometer–knowing how fast you’re going is great, but it doesn’t tell you if you’re driving off a cliff. You can be incredibly efficient in marketing going entirely in the wrong direction. Which is why partnerships between marketing and engineering, as Venkat points out, are critical. But a more perfect partnership for the purpose of simply creating a better machine to manufacture customers is still missing, I think, the point that the social media revolution signifies.

Let me say clearly, first, that I don’t think social media itself is the point–or the really even the revolution that matters. It’s an indicator of something far deeper at play, which I’ll summarize now, but which requires a more lengthy post to give it the kind of justice Venkat has given to the topic in his post.

Underneath humanistic rhetoric about authenticity, the creation of a customer is an act of control…This explains why customers need to be created, and what innovations really are. Innovation isn’t about creating novel products or services. An innovation is a stimulus that causes a novel and stable pattern of human behavior to emerge.

I think that’s a perfect description of the elevation of what I call “The Magnificent Machine”–the distillation and abstraction of business as a self-substantiating institution, connected to society only through the lens of predatory economics. But business has *always* been a social construct as well. The marketplace is social. Business ecosystems are social. Deals are made and brands are built on trust, which is a social contract. And over the past 100 years, business has arisen in many ways to become the defining construct of human and social identity: More people know themselves by what they do for work, what they buy, what they wear and drive, than by the more traditional frameworks of religion, geography and clan.

But business as a social construct is not convenient for businesses. It’s far more convenient, far less risky, to manufacture customers than to participate meaningfully in a customer community–to the degree that most businesses even accept the importance of the social environment, it’s used as a tool to exert leverage in the customer manufacturing process. As a fungible commodity, customers produce greater short-term margins if you can jettison all that messy social contract stuff labeled as corporate responsibility, green business, not to mention all the costly legislation that protects consumers. The problem is, customers are not isolated patterns of human behavior–they interact. They share impressions, compare product notes, and through the growing accessibility to social networking technology, exert a greater influence over brand reputation and purchasing decisions than the marketers trying to influence them in an “act of control”.

My argument is that what’s driving this change is not social media technology–that’s the enabler. What’s driving it is a fundamental response to generations of being preyed upon by business as a fungible commodity–of being targeted by relentless campaigns that reduce the meaning of the social/business interaction to a process of efficiency that’s convenient to businesses, but not to their customers. Why else have we created do-not-call lists, spam legislation, and government programs for consumer protection? In the simple terms, “consumers” are tired of being minimized in the social contract with businesses. Most would not be able to articulate an intention to change the equation, much less identify any chain of causality between their behavior as consumers and the outcomes shaking so many stalwart markets. They just know that listening to commercials sucks–so they buy a Tivo, or watch more content online. They just know that the fun of buying a product is often killed by finding out the product is junk–so they go online to find out what other people have experienced with the product before they open their wallet. They just know that the realm of social relationships defined by school, work or home are now only slice of what’s available–so they connect with distant friends and new colleagues they meet online to expand their base of knowledge and engagement, much in the same way I’m interacting with Venkat now.

This is a ~real~ phenomenon, and again, the technology is a great enabler, but the drive is more fundamental, more human, more social, than just media. If the relentless drive among humans for understanding, for finding meaning in our lives, can give rise to religion, philosophy and science, why would it not also generate a response to a social and economic equation that has minimized the essence of being human to a stream of consumption behaviors manipulated for the benefit of business?

In sum, businesses are motivated to create the most efficient machine for manufacturing willing customers at the greatest profit. Unfortunately, that motivation is predatory by definition to the people framed as the target consumers. Technology enabled businesses to sway the equation in their favor, by using it to improve the cost of production, to enlarge markets with the technology of transportation, and to flood those markets with carefully choreographed messages to influence purchase decisions. As long as all that technology was expensive, it was an equation defined by business control. But as technology has been increasingly commodotized, consumers have found the means and the opportunity to stem the overwhelming influence of business–a reaction I’m arguing has a fundamentally social root. It’s messy and chaotic, but trends are emerging that show how new lines of power might emerge.

I don’t think any of this minimizes the importance of numbers-driven marketing–businesses are still in a game of survival with aggressive competitors, and they need efficient processes to succeed. But I think that’s only half the story businesses need to understand in today’s changing environment. Customers are not isolated and mass-replicated patterns of human behavior. They are communities of real people who function increasingly as self-organizing systems of market influence, and engaging them profitably and sustainably means a lot more social participation in the process of marketing and innovation than asymmetrical and efficient acts of control.

Brilliant post, Venkat. I agree with so many of the details you describe–and wish I did them better justice with a more refined and less rambling response–it’s only the abstracted picture of where those details drive most businesses that I offer a counterpoint.

Update: In one of the funniest emails I’ve gotten in a long time, a company just notified me that my discussion of the concept “manufacturing customers” violates their trademark, so in the future, they’d like me to know I’m required to capitalize it in acknowledgment of their ownership. I would post the name of the sender, but a) it was a private email, and b) I don’t want to advertise the company. However, if they’d like to post their email as a comment, and make good on their offer to “join the conversation” maybe we can start with a discussion of the fair use doctrine.

{ 6 comments… read them below or add one }

Mitchell Gooze September 9, 2009 at 5:30 pm

As I mentioned in my email to you we LOVE the fact that you chose to use a manufacturing analogy for creating customers. We have been talking about the idea for 15 years. And the more people who think that way the better we like it (obviously). My note to you was simply a requirement to maintain our trademark on the term Customer Manufacturing, which we own. The ideas and concepts of manufacturing customers is not private to us, just the specific term Customer Manufacturing, which you used one time in your post (ah the coolness of Google Alerts). If you intend to continue a conversation about the benefits of considering manufacturing customers we would appreciate the opportunity to be part of the conversation.

Mitchell Gooze September 9, 2009 at 6:11 pm

So now that I dealt with your chuckle and the “fair use” issue, lets talk about something useful.

We appreciate your thinking about abusing customers and agree that manipulating them is inappropriate. In addition, I would concur that some companies are reluctant to recognize that the social construct is what actually allows business to thrive. Word of mouth has been around for a VERY long time. It’s just that “mouths” can travel so much further these days and controlling those “mouths” is pretty much impractical. Though paying bloggers for commentary does seem to be in vogue by some.

In our self-defense, we do not use the manufacturing analogy as a way to manipulate or abuse customers, but rather as a way to manage a process of helping the right customers buy right.

Thanks for letting us play.

Mitch

Chris Kenton September 9, 2009 at 8:00 pm

Mitch–

What set me off was a private email–rather than a public comment on this blog–notifying me of the boundaries of my right to use the term “customer manufacturing” along with the insistence that I capitalize it in the future. Intended or not, that came across as a thinly veiled cease and desist, which frankly got my hackles up. My use of the words are patently within the bounds of fair use–they are used in a non-commercial blog post offering general industry commentary, and are not a reference to any product, company or even a defined process, but are used obviously as a generic phrase to describe general marketing processes engineered to treat customers as a fungible commodity. I think there are better ways of joining the discussion–and I appreciate that you took the time to comment.

Not to put to fine a point on it, but as I stated in the post, I think the metaphor of manufacturing customers is laden with dangerous assumptions about the power and control companies enjoy over consumers these days, much less in the years to come. Similarly, the concepts of “campaigns”, “targeting”, “acquiring”, and even sales “forces”, are militaristic notions of control over “consumers” that are artifacts of a paradigm in decline. That is not to say companies don’t need efficient operations and repeatable processes that can be measured and improved to the benefit of the company’s bottom line. But the degree to which the formulation of those processes is embedded with an inherent view of the relationship with customers as one of asymmetrical control, is the degree to which I think companies are entirely missing the point of what’s going on the market today.

The relationship between businesses and customers is changing, and the tide right now is moving in the customer’s favor–and I mean that on a far deeper level than Web 2.0 technology trends like Twitter and Facebook. Companies that think they can just adopt social media tools and customs as a new vehicle for exerting the control they’ve always enjoyed are, I think, in for an uncomfortable ride. Whether they see it coming or not.

/chris

Venkat September 10, 2009 at 5:38 am

Wow, that’s one complex response. I’ll have to think about it a bit before I post a more meaningful comment!

And interesting that you got into a skirmish over the term ‘customer manufacturing’ here :)

Venkat September 11, 2009 at 3:39 pm

“Customers are not isolated and mass-replicated patterns of human behavior. They are communities of real people who function increasingly as self-organizing systems of market influence, and engaging them profitably and sustainably means a lot more social participation in the process of marketing and innovation than asymmetrical and efficient acts of control.”

Something was worrying me about your post, and I now see that it is this part. You see reductive definition of a customer as a behavior pattern as a sign of hubris, while I think I see it as a sign of humility. Yes, it is an attempt to control, but an attempt that is modest in its ambitions: to get you to drink orange juice instead of coffee every morning for instance.

In a sense, social media is in fact driven by a greater hubris and a greater desire to control. “Will you buy orange juice” is a simpler sales/marketing/control pitch than “will you marry me” (the social media relationship proposition can, in the hands of the most enthusiastic, be as intimate as marriage).

So one thing I like about marketing 1.0 is in fact its honesty within its limited agenda. The marketer didn’t pretend to care about you as a person (other than in ritualistic and coded ways customers could easily detect). In social media, the danger is coming across as pretending to care while a) you don’t NEED to b) you can’t. Your million customers can’t possible all be your intimate friends. The only thing you CAN do is try to gain visibility into the WOM 1:1 dynamics that have always occurred, but are now visible to the marketer, and intervene occasionally. Nothing else will scale, or be credible in its claim to honesty.

So yes, you do have to be social and engage SOME customers as full human beings, but you can’t do that for ALL of them. The rest STILL are simple modified behavior patterns. The ones you treat as full humans are merely those who are temporarily important in your WOM strategy as opinion leaders etc., and I think it is important to acknowledge as much when engaging them: “Thanks for being such a great champion for our products. How can I help you?”

So how do we resolve this contradiction: the richer, apparently more humanizing medium is also apparently more controlling and ambitious in its intent?

I think the answer is that the core behavior modification element of marketing remains the same. It is a simple, straightforward and uncomplicated pitch (which is not to say it is unsophisticated, as the examples in Dan Ariely’s Predictably Irrational show). The rest of the engagement though is what I’d call ironic marketing collateral. A wink-and-nudge meta-discourse acknowledging theatricality of the interaction, thereby rendering it more authentic.

Haven’t fully processed this line of thought though…

Chris Kenton September 25, 2009 at 4:00 pm

Wow. I feel like we’re two satellites orbiting an object of great mass; this could spin out of control. :)

I wrote a reply as a comment, but then decided to publish it as a post. Looking forward to continuing the dialog.
http://www.chriskenton.com/2009/09/another-thread-on-the-bursting-media-bubble.html

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