Jun 292007
 

In April of this year Steve Barnett and I published two papers in the Cutter IT Journal on Resonance Marketing, the art and science of developing product offerings that resonate with customers’ wants and needs, cravings and longings. Resonance products represent such ideal fit with customers’ individual preferences that each becomes sort of a mini-monopoly, and the importance of price and price-based competition is greatly reduced.

David Lineman published a thoughtful response, “Securing the Long Tail,” in which he reminded readers that resonance should not be achieved by collecting and misusing data on individuals” shopping history or other transactional logs. He listed four points, recently stressed by the European Union in a policy on data collection and use:

How do you strike the balance between privacy and functionality? I argue that almost everything is okay, as long as you ask permission. In summary, be honest. Be transparent.

What this means in detail is that companies must do four key things when marketing to informed consumers:

  1. Request permission to collect data, and tell the consumer what and why you are collecting it.
  2. Only collect the data you need, and nothing more.
  3. Take steps to protect the data.
  4. Tell the customer exactly how you are going to do steps 1-3.

These four ideas are simplified summaries of the Organization for Economic Cooperation and Development (OECD) privacy principles. The OECD has codified a number of best practices for managing customer privacy, organized around eight key privacy principles. The principles are the foundation for many privacy laws. And they are very much common sense.

In my response, to the Lineman article, which you can read in its entirety, I point out that the four points are not new. Indeed, I first encountered them in the data usage policy of a major hotel chain over twenty years ago. But they are more important than ever before because information technology makes it easier than ever to collect, analyze, use, and abuse information. Rather than producing resonance, abuse of information will cause customers great discomfort, and can indeed result in their leaving for other service providers with policies that seem less intrusive, less invasive, or simply put, less offensive. If it is to be effective, resonance must not be based upon surveillance.

Not all resonance is based on matching products to individuals’ history. Products are often designed to fill gaps in the marketplace, identifying and responding to unserved and underserved segments of the market. And increasingly, once designed, these products are not pushed out at consumers based on information acquired by observing and knowing ever more about the consumers’ history of actions. Rather, products are found and pulled in by consumers, based on each consumer’s profound sense of informedness empowered by the information endowment provided by the net. Although there is a common perception that resonance means customization, and customization is based on invasion of the customer’s privacy, neither needs to be the case. Resonance does not need to be based on surveillance.

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Eric K. Clemons

Eric K. Clemons is Professor of Operations and Information Management at The Wharton School of the University of Pennsylvania. Dr. Clemons is a pioneer in the systematic study of the transformational impacts of information on the strategy and practice of business.

Discussion

  5 Responses to “Resonance, not Surveillance!”

  1. The OECD Privacy Principles were first established in 1980; very forward-thinking indeed considering that at that time there was no Internet as we know it today (Arpanet and the subsequent DARPAnet were much different environments, being the embryonic stages of the current Internet), personal computers were just being developed, and most information was centrally processed within mainframe environments.

    For more information about the OECD Privacy Principles see http://www.oecd.org/topic/0,3373,en_2649_34255_1_1_1_1_37441,00.html

  2. avatar

    Just a quick note to second Eric’s observation that not all resonance marketing is the result of mining data about customer characteristics or purchase histories, and to provide an example or two. In research Lee Devin and I are doing, we find that often the most highly differentiated products are those that customers interpret as having some sort of aesthetic dimension, some degree of what you might call “meaningfulness” that is often intangible and not purely functional. A great example (which I presented in fuller terms at the Cuter Summit) is the Vipp trash bin. The Vipp trash bin appears, at first glance, to compete in a category (trash cans) historically valued pretty much entirely for its functional value. But by cleverly managing the intangibles and PR associated with their physical product (getting it exhibited at the Paris Louvre, for example), they end up marketing something much bigger than a mere trash bin. As a result, they command prices in the $250 too $600 range, and have seen demand grow 30 to 50 percent annually. Bang & Olufsen, which sells exquisitely designed consumer electronics products (the Museum of Modern Art in NY has declared that no company has contributed more to modern industrial design than B&O), has a keen following of customers who love the high performance and beauty of their products so much that they are willing to pay very high premiums for flat screen TVs and high concept stereo equipment.

    My main point here is that you don’t produce these kinds of highly differentiated products only (or even mostly) by mining customer data to understand what customers will want. Just giving customers what they want, however well, won’t justify the margins these companies demand. As David Lewis, chief designer at Bang & Olufsen told us in the research interview, “we don’t do any market research…we just give customers something that they can’t resist. And that is the challenge.” Lewis and others like him have keen insights into what customers want, but they don’t get them from querying a database. And their own fidelity is usually to a concept of design integrity and internal coherence that customers value in their products. Customers want to be led in such categories, and they are willing to pay handsomely to be led into interesting places.

    It’s interesting to contemplate how this philosophy might be applied to the production of IT systems, another category historically valued pretty much purely in functional terms. If we are honest, we’ll admit that it’s a given that customers often don’t know what they want, and want to be led. We’ve historically, in IT, done a highly imperfect job of this kind of leading. I personally think the problem starts with the way we frame the problem and talk about it. We speak of “user requirements” as our objective. David Lewis delights his users, thus meets “user requirements” in some sense, but he would never set our merely to “meet user requirements.”

  3. The impact this week of the release of the iPhone certainly supports everything Rob Austin said!

  4. avatar

    Rob, Karen,

    Yes! Yes!! Yes!!!

    Vipp, B&O, and Apple are wonderful corporate examples of companies that produce resonance marketing products. Consistent with resonance marketing and informedness, both described in my original article (Cutter IT Journal, April 2007), there is no need to push these at consumers by invading their privacy. Consumers cheerfully find them products, queue for them if necessary, and pull them in. The same principles apply equally well, if less dramatically, to extreme beers, organic fruit juices, artisan breads, high performance sporting equipment, powerbars, eco-tourism, and the wide range of products and services that at least some of us find irresistible. B&O does not tailor its product for or aim its marketing messages at me by invading my privacy and pushing these products at me. B&O gets stuff as close to perfect as they can for their own sense of aesthetic design, and then counts on a number of us to agree with their design decisions. The same can be said about almost all companies that offer resonance products and services.

  5. My feelings are that if you have nothing to hide then what’s the big deal whether or not there is additional surveillance measures added into society. I’m not doing anything bad so I don’t mind a few extra cameras here and there.

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