For about ten years now I’ve been banging on about buyer-centricity – the concept of a business that exists to work for and on behalf of the individual, helping the individual manage his or her relationship with the world out there, including organisations.

For a long time now, I’ve been working with Iain Henderson and others, including William Heath and David Alexander, to make this vision a reality.

Next week we announce publicly a test of the first working prototype of such a service: The Personal Data Store.

In preparation for this launch, we have published a White Paper (http://bit.ly/b1jvGN) which explores the concept in depth: what it does, how it works, what its implications are. I would be really interested in your comments.

PS: This is what the Press Release says:

30th September 2010

PRESS RELEASE

“The case for Personal Information Empowerment” –

Mydex publishes groundbreaking White Paper
Imagine a world where:

• Instead of signing companies’ terms and conditions and agreeing to their privacy policies every time you do business with them, they sign yours.

• Instead of people spamming you with messages, you choose who communicates with you about what, when – and can turn these communications on and off at will.

• You have much greater visibility and control over what organisations are doing with your personal information.

• You don’t have to remember a different password every time you log on to an Internet site.

• Instead of being tracked and monitored wherever you go online (or offline     for that matter), you collect your own data about yourself which companies pay to access.

• When you’ve got a complicated online form, you can fill it in almost automatically (and safely and securely) with just a few clicks, and automatically save a copy for your own records.

• When you move home or make other changes in your life, you don’t have to phone up or go online with dozens of different organisations jumping through their hoops set up for their convenience. Instead, you can tell them all at one go, simply by registering this change in your own personal database.

• Where governments and organisations can cut the cost of managing data and privacy protection whilst increasing security, efficiency and quality of service to individuals through a controlled exchange of information.

This is Mydex’s vision of the world outlined in its new White Paper: The Case for Personal Information Empowerment – The rise of the personal data store.

In the White Paper, Mydex * proposes that a fundamental shift in personal information management –  where individuals ‘own’ and manage their own personal data – transforms relationships between individuals and organisations with significant benefits for both sides. It is also the catalyst of an entirely new business and service eco-system of personal information management services.

The White Paper provides the context and ‘big picture’ for a unique live service – the Personal Data Store – which will shortly be trialled.

The Mydex service:

• helps people regain control of their personal data – so that they only share it with other people and organisations when they want to and how they want to.

• helps individuals turn their personal data into a personal asset which supports them in managing their lives better and which also saves them time and hassle and may even earn them a bit of extra cash

• uses next-gen internet technologies that transform users’ online experience (say goodbye to passwords, log-ins and cookies, for a start).

ENDS/

http://bit.ly/b1jvGN Mydex     White Paper: The Case for Personal Information Empowerment:                 The rise of the personal data store

* Mydex is incorporated as a Community Interest Company, which means that it is designed as a social enterprise that wants to use its profits and assets for the public good. Mydex’s social purpose is “to help individuals realise the value of their personal data”.

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AlanMitchell 'The Information Age', Buyer centric services, Data, Privacy, vpi

Whenever marketers use the word ‘customer’ or ‘consumer’ they bury themselves deep within an organisation-centric view of the world: these terms are seller-centric inventions.

The only entities that see ‘customers’ or ‘consumers’ when they look at the world are organisations trying to sell stuff. When marketers talk about customers and consumers, they are not talking about the world ‘out there’ as it really exists, they are looking into a mirror reflecting their own internal obsessions back to them.

A customer is someone who buys what we sell. When the organisation looks at ‘the customer’ it is just looking at ‘what we sell’ from a slightly different perspective, a perspective designed to help it sell better. There is nothing wrong with this per se. There is lots to be said for it. But it is a seller-centric projection. You can spend an entire lifetime peering into this mirror without ever seeing what lies beyond.

One way of looking beyond this mirror is to recognise that every product or service that meets a need – i.e. that’s sold – also generates a new need: the need to make a decision.

In the industrial age, meeting this meta-need – the need to make better decisions (and to implement them better) – wasn’t the seller/marketer’s job. There was a division of labour. The job of the organisation was to make a good product. The job of the ‘consumer’ was to make a decision – a choice. And the job of the marketer was to influence these decisions.

This was probably inevitable at the time. Decision-making is an information intensive task and gathering and using information in an organised way was prohibitively expensive.

A tectonic shift

But today that’s changing and we can look at the world through a different lens – that of the decision-maker (the person) rather than that of the decision-influencer (the seller). Once you do this it quickly becomes apparent that this meta-need – to make (and implement) better decisions – is bigger than all other needs (for chocolates, for cars, for current accounts etc) because it embraces them all, subsuming them into the bigger task of achieving what the person (not the seller) wants to achieve.

Person- or buyer-centric services then, sit on the side of the individual, helping the individual achieve what the individual wants to achieve, including managing relationships with many different suppliers more efficiently and more effectively (VRM, or Vendor Relationship Management). The central questions here are, What challenges does the person face when doing this? How to do it better?

The difference between now and say, twenty years ago, is that twenty years ago this person-centric perspective was operationally irrelevant. You couldn’t do anything practical to help people address these challenges. When marketers said ‘the customer is king’, it was just a disguised way of saying ‘the organisation is king’.

Now, however, as information becomes a tool in the hands of the individual, that’s changing. The organisational king is being deposed. This is not about superficial changes in ‘how to achieve the same old marketing goals better’. For example, it’s got nothing to do with arguments about whether it’s easier, cheaper or better to get marketing messages across via social media or mass advertising. It’s a deep, structural, tectonic, remorseless and comprehensive transformation in the relationship between individuals and organisations.

And if you keep on looking in the customer mirror, you simply won’t see it coming.

Alan Mitchell

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AlanMitchell 'The Information Age', Buyer centric services, Project VRM

Last night, eloquently supported by my colleague William Heath, I gave a master class on Volunteered Personal Information for the IDM (Institute of Direct Marketing).

My concluding summary was:

•    We are in the midst of a once-in-a-century tipping point in the information flows in our society: from ‘top down’ (organisation to individual) to ‘bottom up’ (individuals to organisations and each other).
•    Marketing as we know it was constructed around the assumptions and operational requirements of ‘top down’.
•    Most of its current problems and constraints are a by-product of this heritage.
•    In the course of organising and managing their daily lives – making and implementing decisions – individuals generate huge amounts of new, rich, accurate, timely information about who they are and what they want..
•    An emerging industry of Personal Information Management Services (PIMS) is making it possible for individuals to capture and share this information.
•    For this information to be shared on a mass scale however, three new ‘rules’ of personal data must be accepted: personal information is the person’s; the individual must have control over what information is shared with who, for what purposes; the individual has to derive a genuine benefit from the information sharing process.
•    Once these rules have been accepted, multiple different types of VPI will begin to flow.
•    Separately and together this VPI can help organisations cut guesswork, waste and costs, identify customer needs better and focus available resources on truly adding value: a ‘VPI value explosion’.
•    Every organisation needs to develop its own VPI strategy.

If you want to find out more, get in touch with me at Alan.Mitchell@ctrl-shift.co.uk and I will send you a shortened version of my presentation.

Alan Mitchell

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AlanMitchell 'The Information Age', Buyer centric services, Uncategorized, vpi

At the core of the buyer-centric concept is the simple notion that for most people, value boils down to the ability to make and implement better decisions – at every level from life defining to choice of toothpaste.

Trouble is, once we start investigating what a ‘better decision’ might look like, it turns out to be pretty complicated.  New discoveries in psychology are underlining just how complicated human decision-making is, and the whole debate has been shrouded in a fog of confusion – most of it generated by marketers and their self-serving theories of ‘persuasion’.

Anyway, I’ve been gnawing away at these issues over the past few months and will at the grindstone for a while yet.

If you are interested in some half-way house conclusions, you can see my summary of what new findings of psychology mean for our understanding of consumer decision here, and why most marketing theories about consumer decision-making are so much claptrap here.

Really keen to hear any thoughts or comments.

Alan Mitchell

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AlanMitchell Buyer centric services, Marketing, The Persuasion Paradigm

One of the things that falls out our analysis of personal data ecosystems is the power of ‘volunteered personal information’ (VPI).  This is information that only the individual knows or can see because of his or her unique vantage point, and which (therefore) only that individual can share.

This creates many knock-on questions.

One of them is ‘how valuable/important is this information?’. Answer: unthinkably valuable, because potentially this volunteered information tells us (i.e. suppliers, governments, public services, other individuals) who somebody is, what they want and need, and when they need it. The ‘holy grail’ of information about the nature, shape, location and timing of demand, in other words. The new report from Ctrl-Shift on this subject estimates that within ten years, the market value of VPI ‘feeds’ from individuals to organisations will be worth £20bn in the UK alone.

Other questions follow, such as:

• ‘what are the mechanisms by which individuals are going to capture, gather, store and share this information?’
• ‘under what conditions will they do so? e.g. what are the incentives encouraging people to participate and what are the obstacles discouraging them?’
• ‘what are the rules surrounding such information sharing? This includes technical standards, enabling information to flow easily, but also terms and conditions as to who has access to this VPI, for what purposes, under what terms?’

These are all huge questions, which many people are working on right now (see, Project VRM, Mydex and the Kantara Initiative for example).  I’ve blogged about some of the issues surrounding VPI here.

Alan Mitchell

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AlanMitchell Buyer centric services, Data, Project VRM, vpi

The British Standards Institute have produced a new set of standards for what they call PIMS (Personal Information Management Systems).

Of course, this PIMS is the complete opposite of the PIMS we have been talking about for the last couple of years. Their standard is for organisations managing individuals’ personal data. Our PIMS are for individuals using information to manage their affairs.

‘My PIMS’ versus ‘Their PIMS’. Oh dear, more terminological confusion here we come!

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AlanMitchell Buyer centric services, Resources and Papers

The more I talk to people about consumer decision-making and the potential for buyer-centric services, the more I hear what appears to be a new conventional wisdom: that consumers don’t know what they want until marketers tell them.

This was one of the pushbacks I got from my talk at Nottingham Business School. Like so much else that’s said about the so-called ‘irrationality’ of consumer decision-making, it’s a) more complicated than the simplistic slogan and b) fuelled to a large degree by marketers’ own self-serving propaganda.

So let’s look a little closer.

First, there is the whole debate about the role of conscious and unconscious processes in decision-making. I’ve touched on that elsewhere so won’t return to it here. So what else is there?

Innovation

Well, there is one important area where it is absolutely true that consumers don’t what they want until marketers tell them: the arena of innovation where the consumer doesn’t know what’s possible.

For example, he is ignorant of technological or other capabilities and doesn’t know that it’s possible to fly through the air in a steel tube, or talk to a person on the other side of the world in real time, so he thinks he has to go by boat or write a letter.

This is probably the most important area where the line ‘consumers don’t know what they want until marketers tell them’ is absolutely true. It’s the background to Henry Ford’s oft-quoted remark that if he had asked consumers what they wanted, they wouldn’t have said a motor car; they would have said a faster horse. It’s where innovators and inventors come along and say ‘you never knew this before, but now it’s possible to do X!’

But we also have to keep it in perspective. Time and time again, studies of new product launches show that the vast majority of so-called ‘new’ products are actually new versions of old products – an added tweak or feature, a variant of some sort. A tiny minority of supposedly new products – around 1-2% – are actually new to the world. So while it’s true that consumers don’t know that they want innovations till they see them, this truth actually only accounts for a tiny proportion of total marketing activity.

Clever marketing?

So, apart from this tiny proportion, where else does the adage hold true? Well, there are number of areas where it seems like it holds true, but probably doesn’t. Here are three examples:

• The consumer doesn’t know what’s available. In most markets, especially where consumers are relative novices, they only have a cursory knowledge of what’s available on the market. Because the costs of searching for information about these different choices is so high they often don’t bother. In these circumstances, they become at least partially reliant on marketers telling them what’s available – and when they come across what they want, they go out and buy.

Viewed from the point of view of the marketer, this looks like the consumers waiting for the marketer to tell them what they want, but actually it’s nothing of the sort. Consumers’ apparent passivity is a by-product of the high costs of searching, sifting, comparing what’s available. The job of buyer-centric services is to help consumers know what’s available, thereby reducing their dependency on this sort of spoon-feeding.

• The consumer doesn’t know what’s best In some cases, even where the consumer is aware of a wide range of alternatives, he still doesn’t know which option to go for: he needs advice. Again, this is especially true when the consumer is a relative novice and where the product or service is relatively unfamiliar or complex.

What the consumer really needs here is trustworthy advice. But usually that’s not available at an affordable price, so the consumer has to take a different approach. Historically, one of the lowest risk routes available was to opt for the most reputable, most famous supplier i.e. the one that did the most advertising.

Again, the ‘evidence’ seems to show that it is the marketer telling consumers want they want, but actually this evidence is just a manifestation of a deeper issue – the high costs of getting trustworthy advice.

The job of buyer-centric services is to provide the trustworthy advice (see Problem Solving Communities) thereby reducing dependentce on these short-cuts.

• Impulse purchasing, where the consumer is titillated by the marketer’s marketing I remember once, I went out and the weather turned nasty. I was on my way home feeling cold, wet, hungry and miserable when I saw an ad for Heinz Tomato Soup. I looked at the ad and thought ‘that’s just what I want to warm and comfort me’ – and bought a tin there and then. I didn’t know that I wanted a bowl of hot tomato soup until the ad ‘told’ me and triggered the desire.

Marketing activities such as these crystallise desires by stimulating consumers’ senses. This is the secret behind impulse purchases, and it will remain a feature of life as long as human beings have impulses.

But again, if you look at purchasing as a whole – especially in terms of amounts of money spent – most purchases aren’t impulse, they are considered to some degree or other. And on many occasions, the consumer defaults to an impulse approach because the cost or complexity of making a better, more informed decision is so high.

So if we look at the above four scenarios, we discover that only one of them really holds true: the case of ‘newness’ where much of the value that’s being provided comes from the very fact that nobody has thought of this before. The other three areas where it seems that consumers need to be told what they want are actually symptoms of the deeper problem: that in today’s commercial environment, the costs of decision-making are so high that most people opt for short-cuts, because otherwise they would go mad.

When we do know what we want

The other side of the coin is that there are also a number of cases where it’s palpably not true that consumers need to be told what they want. In every market you can think of, there is always a spectrum of consumers ranging from the complete novice who doesn’t even know what questions to ask, to the absolute connoisseur. In other words, market by market, category by category, product by product, situation by situation we are all of us on some sort of learning curve.

The more experienced and knowledgeable we become, the more we know what we want and the less helpful marketers trying to tell us otherwise becomes. In fact, at this end of the spectrum the boot moves to the other foot, where marketers need to engage with these consumers because they know what they want better than the marketers! This is the impetus behind the growing interest in ‘co-creation’.

A common half way house here is where people ‘sort of’ know what they want, but find it hard to articulate and express.

The really big area is in the middle: the many cases where consumers currently rely on marketers telling them what they want because, the way markets currently work, the sheer hassle of doing anything different is simply much too much.

The buyer-centric opportunity

Now, if we look through this list, we discover the potential for a whole range of different buyer-centric services. For example:

• Where the consumer doesn’t know what’s available, making it easier and quicker for the consumer to find out (by for example, using search, peer-to-peer, buyer’s guide and other mechanisms)
• Where the consumer defaults to heuristics for lack of good advice – here the buyer-centric service can make the consumer less reliant on the marketer by providing better advice via peer reviews, expert reviews, problem solving communities and the like.
• Where the consumer needs help in articulating exactly what they want/need. Looking forward, this is probably one of the richest areas of buyer-centric service, and it’s made possible by consumer-to-consumer information sharing: ‘I might not have been on this journey before, but many others have – and I can pick their brains to help me work out what’s right, and what’s not right, for me’.
• Where the consumer wants to specify what they want but can’t get. This is the arena of specialist ‘request for proposal’ services which reverse the flow and which help consumers to talk to marketers and say ‘actually, this what I want’.

So what’s our net conclusion?

• First, there is a role for the marketer ‘telling consumers what they want’. But in reality, it’s actually quite restricted – mostly to the arena of innovation.
• Second and much more important, there is a massive unmet need for services that help consumers work out and articulate what they want for themselves.

Most marketers’ claims about consumers needing to be told what they want do not relate to the passivity or lack of imagination of consumers – they relate to the costs consumers incur when they go to market; costs which are, for the most part, created by marketers themselves; costs which make navigation, choice etc expensive and difficult and which prompt consumers to opt, instead, for whatever marketers put in front of them.

Alan Mitchell

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AlanMitchell Advertising, Branding, Buyer centric services, Marketing, The Persuasion Paradigm, Uncategorized

One of the sessions at the VRM workshop in San Francisco last week focused on Requests for Proposals or RFPs.

The idea is pretty straightforward. A buyer creates an RFP for something she wants to buy, sends it out to the market, gathers up sellers’ responses and makes a choice.

Sellers, knowing they are competing against each other for a ‘hot’ lead, may be incentivised to offer an extra special deal. Buyers also benefit from the fact that it is a hassle-free process – the offers coming streaming in straight to your digital ‘front door’ when you ask for them. This is especially so if the RFP process creates an anonymity shield which stops sellers from scraping the buyer’s contact details and spamming her.

One way of doing this is, for example, is to ask sellers to upload their responses to a temporary URL which only the buyer knows about. Once the buyer has made her choice, or after a certain time span, the URL can be closed down.

It sounds a like a neat idea and for a time I thought it would be one of the vanguards of buyer-centric commerce. The more I look at it however, the more I think it is still a good idea – but something that will only really work well once lots of other supporting bits of infrastructure and service are in place. (For more details on this see our White Paper on Added Value Buying Services) In other words, aside from a few ‘pure’ applications it is a ‘later’ rather than ‘sooner’ development.

Here’s why. The immediate technical challenges of creating anonymous links between buyers and sellers are relatively solvable. At the moment, open source software expert Don Marti is leading the charge on this (http://zgp.org/~dmarti/business/upside-down-bg/).

Trouble is, even if we crack the technical messaging bits, there’s still a lot more we have to do to make RFPs really work. For example, we have to address the potential obstacles that exist at both ends of the process. Specifically:

- helping would-be buyers build a specification that’s clear and detailed enough for vendors to respond to
- a means of translating buyers’ expressions of desire into language that sellers can understand and respond to
- seller response processes that ‘understand’ RFP feeds well enough, and efficiently enough, to generate meaningful, useful responses.

These are not easy problems. They are very hard problems relating to language (the two sides understanding each other well enough to communicate), and value (the two sides getting enough value from the new process to think it worthwhile).

On language, the RFP problem is easy if the buyer can name an exact product title (e.g. down to bar code/electronic product code detail) – a ‘language’ that fits directly into the seller’s systems. But this probably accounts for 0.01% of real buyer requests, most of which include an element of search, discovery and uncertainty.

The other 99.99% of buyer requests will be much vaguer, along a spectrum e.g. I want to buy:

- a digital camera
- a digital camera in this price bracket
- a digital camera with these sorts of features in this price bracket (but I’m not really sure what these features are, or how important they are to me)
- a digital camera of this brand with these features in this price bracket (though I haven’t thought about which of these features are ‘must haves’, ‘nice to haves’, and so on
- a digital camera of this brand and model with these features in this price bracket.
- only this brand with a choice from these particular model variants, with these clearly specficied features.

Under an RFP system, sellers not only have to understand and respond relevantly to this spectrum in a way that generates easy-to-understand and easy-to-compare information that is useful to the buyer, they first of all have to understand what the buyer is ‘getting at’. For example:

- is the buyer describing features using exactly the same language as those described by seller in his product catalogue? [e.g. What if the buyer says he wants a 'fast' computer, or 'an easy to use' camera?] As soon as the seller needs a human being to read and understand the buyer’s description the RFP process may become far more expensive, not cheaper, than existing systems. On the other hand, if we rely simply on machine recognition of key words we will generate more spam than value, even if unwittingly.
- what if the buyer’s specifications don’t fit the market? (i.e. she can’t get all her desired features within her stated price bracket?) How does the seller respond to this? By simply spamming her with all available options? How does the seller help the buyer understand what these trade offs mean, and their pros and cons? As soon as the process goes beyond ‘a single shot’ of buyer RFP/seller offer (as soon as it requires ‘a conversation’) RFP style messaging processes don’t work very well.

This raises many issues of cost and value for both sides: ‘am I convinced that using an RFP is really the most cost-effective way for me to go to market?’

These are not just finicky details. Without a lot of surrounding services and processes to help buyers and sellers at both ends, pure RFPs which focus only on better Internet-based messaging between buyers and sellers are only likely to create a workable win-win with a vanishingly small proportion of transactions.

On top of this, as Bart Stevens (www.ichoosr.com) points out, there’s another barrier of user trust to overcome. Many consumers are so jaded be clever ‘bait and switch’ marketing ploys that seem honest and good value in the beginning only to have a sting in their tail, that they are wary of taking up genuinely new buyer-centric opportunities even when they do emerge.

It’s not only seller-centric marketers who are interested in behaviour change!

Anyway, my conclusion is that:
- the real ‘value add’ here probably does not lie in the messaging/contact aspects of the RFP process but in the specification building process – helping buyers articulate demand in such a way that it fully and accurately fits what they want, in a way that streamlines rather than complicates seller processes.
- while at first sight RFPs look like an easy ‘low hanging fruit’ for VRM, I suspect they will end up being one of the hardest – and last – nuts to crack; the ‘artificial intelligence’ of VRM if you like, where, only after thirty years of failing to solve this ‘simple’ problem do we actually realise how complex it really is. (We tend to underestimate just how complex buying processes are because, currently, most of the complexity is handled inside buyers’ heads. The complexity only becomes apparent when we try to automate it.)

But that’s not to say cracking the communication protocols is a bad idea.

Alan Mitchell

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AlanMitchell Buyer centric services, Project VRM

Interesting discussions on the VRM steering group prompted by Doc Searls’ blogs about ‘fourth party services’ (http://blogs.law.harvard.edu/vrm/2009/04/12/vrm-and-the-four-party-system/).

The bottom line is that I think the concept of ‘user-driven’ services as espoused by Joe Andrieu (e.g. (http://blog.joeandrieu.com/2008/07/12/towards-user-driven-search/) is risky for two reasons.

First, it muddies the waters around VRM’s unique and special contribution:  its focus on creating services that work on the side of the individual.

Second, it narrows the VRM agenda, to focus too much on mechanisms of user control, and not enough on even bigger challenges such as the design of new business models.

More detail, for those who are interested…

As far as I can see, ‘fourth party services’ are pretty much the same as the Personal Information Management Services we’ve talked about on this blog for some time (http://www.rightsideup.net/?page_id=58)

The debate itself stems from a growing a realisation that there are at least two ‘levels’ of VRM.

The first level simply gives individuals software based tools, like mobile phone apps, that the individual can use how and when they want.

The second level is when a specialist service or business provides extra infrastructure, functionality or services that help individuals do things they couldn’t do if they were left to themselves with their ‘apps’.

Doc Searls has termed this second layer of services which are acting for or on behalf of the individual as  ‘fourth party’ services. There are others however, such as Joe Andrieu, who have started talking about ‘user driven services’ (http://blog.joeandrieu.com/ )

As I understand ‘user driven’ it means a service which is shaped – or ‘driven’ – to a greater or lesser extent by the user’s direct input. As Joe explains in one of his emails:

“User driven services are a category that, for me, is as much a direction of innovation  as anything else.  YouTube is more user driven than Cable TV. Blogs are more  user  driven than newspapers.

Every major Internet breakthrough has been by companies being more user    driven in some way. Amazon. Google. eBay. Facebook. Twitter. The web  and the net itself.”

On the other hand, as Joe stresses in the same email, ‘fourth party’ services are much more focused:

“Fourth Party services, in contrast, have a very tightly focused meaning:
fourth parties operate on behalf of you, the individual.  2nd parties
and third parties, e.g., Apple and various iPhone developers, have no
expectation or obligation of acting in your best interest.  However,
your personal datastore does. Your lawyer does.  That’s the distinction:
a fiduciary responsibility to the individual user.”

If we are interested in developing buyer-centric or ‘VRM’ services, which route should we follow: ‘user-driven’ or ‘fourth party’?

The agency concept

The fourth party or buyer-centric service anchors itself on the side of the individual. That’s what defines it and distinguishes it from all other business models and services –  it works for and on behalf of the individual. It is on the individual’s side, acting as the individual’s agent (as I first talked about in my book Right Side Up many years ago).

For me, this is the fundamental intellectual – and practical – departure point. If you don’t get to this starting point you can never ‘get’ VRM or buyer-centricity. And if you don’t keep it as your anchor, you will get lost and confused in no time at all.

For many people however, this starting point is also their sticking point. They just can’t see it. They think we are talking about some sort of altruistic pressure group or charity – not a proper business.

This is odd because none of us have any trouble with big companies paying agents to work for them. In fact, there are so many agencies, consultants, advisors, contractors and so on working for big companies that sometimes it seems they’re the biggest business sector of all. Everyone knows what these agents do. They are employed by BigCo if and in so far as they are successful in furthering BigCo’s interests, as specified by BigCo of course.

The buyer-centric or fourth party service is no different: it earns its keep as long as, and in so far as, it acts for and on behalf of the individual in his or her dealings with other parties – such as all those BigCos with all their agents.

Perhaps one of the reasons people find it so hard to ‘get’ this is because it is so new. To work, it requires innovation on many fronts: technology, service and user-experience, business model, definitions of value, metrics of success, legal, contractual and regulatory issues, and so on.

In my view, the only way we can keep all these innovation projects working hand-in-hand and in sync is if they keep the starting point of ‘for and on behalf of the individual’– this litmus test of purpose – absolutely clear.

Unfortunately, that’s precisely what the ‘user-driven’ concept loses. By shifting the focus from relationship and purpose (e.g. services that work for the individual) to mechanisms (does it happen to be ‘driven’ by the user or not?), the user-driven concept weighs anchor and (to mix metaphors horribly) lets the balloon float free – to be taken in whatever direction the wind of ‘user control’ might take it.

Now. You could argue – as Joe might – that if it is user-driven then it must, by definition, be acting for and on behalf of the individual. I’m not sure. A bank ATM is a ‘user-driven’ service, to some degree. It’s ‘more user-driven’ than the bank counter and the teller – and it’s this spectrum of ‘user-drivenness’ that Joe seems interested in.

But the ATM is there mainly to outsource costs from the bank to the customer. User self-service is a big thing for companies wanting to offload costs on to customers. These companies could embrace the concept of ‘user-drivenness’ quite happily. And without our moorings relating to ‘for and on behalf of the individual’ we can’t distinguish between the two.

It’s also true, however, that the concept of an agent acting for and on behalf of the individual also has its blurry edges. There are, for example, many ways of acting for and on behalf of individuals: political and social campaigning, legal representation, and so on. You could say your lawyer is your ‘agent’. You could say somebody you pay to clean your house or your shoes is your agent too, because they are acting on your instructions.

Marginal or central?

The interesting thing about all these forms of agency is that they lie outside the commercial mainstream. They are either ‘non-commercial’ (e.g. political and social campaigning), or if they are commercial they exist only on the margins.

Lawyers for example, flourish on the back of information asymmetries. They are experts and you depend on this expertise. And they charge you accordingly, so you only employ a lawyer when you are desperate.

The maid cleaning your house lies at the opposite extreme of information processing. Here, it’s mainly manual labour which no one has ever been able to automate. This is the economic equivalent of balloon squeezing. You might push the work from one person to another but the volume of work – the air inside the balloon – remains unchanged. No new efficiencies have been created.

The interesting thing about this is that the lawyer and the maid exist at the extremes of information processing cost/difficulty.

The real breakthrough of buyer-centric or fourth party services is not just the agency concept but how and where this concept is applied – in the heartlands of the economy: commercial activity.

For them to do this, they need to create new types of business which use information in new ways. These are businesses that make their money out of ‘consumer empowerment’ or, in the case of public services, citizen empowerment; services that put the power of information in the hands of individuals to help them do what they want to do more effectively and more efficiently.

To make this happen, most buyer-centric or fourth party services will indeed need to be ‘user driven’. For example, it goes without saying that an agency relationship cannot work if the client (in our case, the individual) cannot specify what he wants to achieve, monitor the work of the agent, and so on. We need clever information technologies to make it possible to do this in ways that are easy to use, on a mass scale. This is a massive innovation challenge in its own right, but it’s just one consequence of the core agent concept.

So, to sum up:

Joe advocates the ‘user-driven’ concept on the grounds that it is ‘a direction of innovation’.

Yes, it is one possible direction of innovation. But actually, the scope of innovation it envisages is quite narrow – basically, the mechanisms/services that enable the user to drive the service.

The buyer-centric/fourth party vision on the other hand requires at least three different levels of innovation. For it to work, we need:
•    Clever new tools, software and so on that help individuals gather, store, slice and dice, analyse, share and deploy the information they need to do the things they want to do. (This, in itself, is effectively a whole new industry)
•    Innovative new business models to make these new technologies happen. (What are the revenue streams for the service, what are the economic incentives for the business and the people it deals with?)
•    Innovative ‘social technologies’: i.e. the rules, practices, relationships and safeguards that generate the trust these businesses must have if they are to prosper.

For VRM to flourish, we need all three ‘dimensions’ of innovation.

VRM’s defining contribution is the notion of using information – and developing information services – that work on the side of the individual. The potential scope and benefits of this idea, for both individuals and organisations, is unthinkably huge.

We blur this focus at our peril!

Alan Mitchell

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AlanMitchell Buyer centric services, Project VRM

My last marathon post on consumer psychology and supposedly ‘irrational’ consumer decision-making was rather long and very complicated, but that’s how these things work. You can distort the truth in one single phrase – but it may take thousands of words to unravel just how and why the distortion works.

Fact is, the issues I described in that post are played out in thousands of ways across every consumer market every day.

Take one simple example: car marketers have discovered that the sound the door makes when you shut it is very important to car users. If it closes with a satisfying ‘thud’ then that ‘thud’ sends a signal telling the user that this car is solidly constructed and safe.

Now. This liking for satisfying thuds is not a ‘rational’ judgement as per pink elephant theories of rationality. Engineering wise, the satisfying thud may, or may not, be connected to the car’s safety performance, but thuds in themselves are not a source of safety. For the most part, the signal is working at an unconscious level: the car user may never notice it enough to comment on it. It goes in ‘under-the-radar’ of consciousness as part of the environmental monitoring we discussed in the previous post – but it does connect directly and powerfully to those primeval decision-making drivers relating to safety and security.

So how does this play itself out in the marketplace? There are a number of possibilities.

•    It might just so happen that in the course of making the car safer, engineers create a door that closes with a satisfying thud. In this happy coincidence, both aspects of the car user’s needs are met: the ‘rational’ need for a safer car, and the ‘irrational’ need for the emotionally charged, under-the-radar signals that create an emotionally satisfying sense of safety.

•    It might be, however, that in the process of making a safer car, engineers create a door that closes with a tinny ‘clink’. In this scenario, even if their car is now objectively speaking the safest car in the world, they risk being punished in the marketplace. No matter how much prospective buyers look at the data on a piece of paper, their largely unconscious senses urge them powerfully – and irrationally – that this car is not safe. So they don’t buy it.

•    A clever marketer then comes along. Because he’s interested in the ‘irrationality’ of consumers decision-making, he uncovers the cause of the problem and tells the engineers that they need to redesign the door so it gives a satisfying thud, even if in doing so, they add nothing to its objective safety performance. In this way, the marketer addresses the car buyer’s ‘emotional’ ‘irrational’ needs as well as his rational needs, and everybody is happy.

But does it stop there? In the last case of adding the satisfying thud to an already safe door, how much extra cost should the engineers incur in making this change, and how much more should the car buyer pay for it? Here we enter the treacherous territory of consumers paying a premium for ‘irrational’ emotional ‘added value’.

But things can get even more complicated. What happens, for example, if in the process of producing the satisfying thud engineers produce a product that’s actually less safe? Here, addressing the consumer’s ‘irrational’ emotional need comes at the expense of the product’s rational, objective performance.

Or consider the possibility of two very different trajectories of competition. One trajectory focuses on the actual process of delivering improved safety performance. The other trajectory focuses on delivering emotionally-driven signals of safety, without bothering with the underlying realities. What happens if the second strategy of addressing the ‘irrational’ emotional signals delivers the company more sales, more quickly than the first one? If so, the industry gets sucked into a spiral of intensifying competition, not around who is best at actually delivering better value, but over who is best at exploiting the consumer’s irrationalities.

The contribution of buyer-centric services

How then, can we positively deal with this situation?

One answer, of course, is via a deus ex machina – the regulator. If a regulator specifies that no car can be made with doors below a certain safety level, then having delivered this minimum standard, marketers can compete in the market for satisfying thuds to their hearts’ content. In many markets, that’s where we’ve ended up.

This answer is not 100% satisfactory however, because often it simply recreates the conflict at another even more intractable level – of condescending, patronising nanny state-minded regulators on the one hand and ‘free market’ marketers forever bitching about how these nanny state regulators a) don’t understand ‘what the consumer really wants’ and b) are always adding cost and complexity via all their extra red tape.

An alternative – perhaps supplementary – approach is that of the buyer-centric service which adds value by helping buyers make and implement better decisions. There are three ways such a service could help.

1) It could focus on the facts – say, helping to produce league tables about which cars are, in objective tests, safer. This can be a useful service – it’s certainly part of the buyer-centric approach – but, as our professors pointed out, it fails to address the realities of ‘irrational’ decision-making; the raw emotional power of that satisfying thud. This is one reason why worthy institutions such as The Consumers Association in the UK and Consumer Reports in the US have always had less influence than they ‘should’. In a funny sort of way, actually just focusing on the ‘rational’ facts in this way actually leaves the field open to marketers seeking to exploit our ‘irrational’ decision-making foibles.

2) It could go one step further by playing the ‘stop and think’ card, I talked about this in the previous post. Here, it wouldn’t just produce a league table of car safety, it would also expose and publicise the devious, manipulative aspects of competition around satisfying thuds when this competition fails to actually address the issue of safety. Such ‘stop and think’ education works in the same way as brand awareness. Once you are aware of something, you can’t make yourself unaware of it. And once you ‘stop to think’ you are more able to let your ‘what if’ mental modelling facilities play a bigger part in your decision.

Buyer-centric services can help buyers make better decisions in this way, though the approach does have a drawback which the professors would have been quick to point it out. If ‘stopping to think’ increases the cost of decision-making too much, many people just won’t bother: life is just too short to spend your time worrying about all these little nuances, especially when they crop up in thousands of different ways, in every market you can think of.

So, unless the buyer-centric service can provide this service in a way which is either very low cost and very easy to use, or fun, it still might not work (though, in cases where the buyer recognises the value of stopping to think it might do the trick perfectly).

3) The third step is to play the marketers at their own game: to deploy the supposed ‘irrationality’ of consumer decision-making in ways that help individuals make better decisions, rather than getting in the way and obfuscating matters.

There are many ways of doing this. One way is to use the same unconscious ‘nudges’ that marketers use to distort buyers’ decisions to help buyers make better decisions. This is the theme of the book Nudge.

Another trick is to note that there is never just one instinctive emotional driver behind a decision. Usually, there are many.

In the case of the satisfying thud, the thud appeals to our instinct for safety. However (for example) human beings also have equally strong emotional instincts around reciprocity, reputations for being trustworthy, punishing cheaters who pretend to be trustworthy and are not, and so on.

Now, if a company prioritises competition around the pretence of safety (the market for satisfying thuds) at the expense of real safety, there is a potentially strong emotional reaction against its cheating motives and actions. This emotional reaction to the company’s cheating is potentially far, far stronger than the one relating to satisfying thuds (once you stop to think about!).

It’s the combination of the three above approaches that makes the buyer-centric service so powerful. Buyer-centricity is not about telling consumers they should be rational pink elephants, or pretending that they are. It’s about understanding how real human beings make real decisions and then using this knowledge to help them make better decisions, instead of trying to use this knowledge as a means of conning them and extracting value from them.

Unfortunately, we still haven’t dealt with all the professors’ objections, because they made another point too: that ‘consumers don’t know what they want until marketers tell them’.

This is another one of those glib catch-phrase distortions that’s simple to say and complex to unravel. I will return to that in my next post.

Alan Mitchell

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AlanMitchell Buyer centric services, Marketing, The Persuasion Paradigm