June 24, 2009

What trumps the market?

Jun. 24, 2009 at 11:51 AM | By Dan Obregon | Comment Count

A few weeks ago I was browsing Tony Hsieh’s Twitter postings (CEO of Zappos) and I came across this humorous exchange between a Zappos customer service rep and a blogger posing as a customer. The blogger is intentionally quirky and makes odd requests, which the Zappos rep cheerfully fulfills. Zappos has been known to encourage their employees to be themselves and doesn’t track metrics like “time taken to solve customer issues.” Employees are encouraged to spend as much time as needed with customers.

Hsieh keeps his Twitter account and the Zappos blog updated, but his main focus is on customer service. His use of social media tools is simply a footnote for the way he envisions his business. While the blogging and Twittering are nice, the real value is in the flexible return policies, free shipping and shoe selection.

I was reminded of this philosophy when I read through this blog post from Logic + Emotion which noted that often times, companies focus so much on social media that they forget that they need to stand behind their “talk” with a company that reflects what they preach through social media. The example given is that of GM. Although they are heavily involved in social media, and even do it well, their business model doesn’t reflect the “social” way of thinking. They still follow an antiquated way of doing business and are slow to change in response to market conditions. The blogger would call Zappos’ method “social business design,” meaning they use social media in a purposeful way. They use online technology to engage their consumers and gauge the market.

Besides the obvious metrics (one of these companies is steadily increasing their market share, one is not), there are other ways to tell if consumers can see the difference between what companies say and what they do. I was particularly intrigued by this study on consumer perception and social norms. The study set out to see what was stronger: market incentives or social norms. I’d always thought that the market would trump any other force involved in human decision making, so I was surprised to see that social norms won out in all of the experiments, even when the “market” choice was seemingly in the participant’s best interest.

In one example, lawyers were asked to offer their services at a discount to help low-income families, many refused, but when asked if they’d offer their services for free, many more agreed. In another experiment, participants were asked to perform menial tasks- part of the group was to do it for free and part of the group was to be paid. Surprisingly, the un-paid group was more efficient. Applied in terms of everyday life, there are many examples of people who perform risky tasks for low pay- think of teachers and firefighters. The study shows that social norms play a much larger role in establishing behaviors than monetary incentives. Customers know when a deal is offered to them as a market exchange or a social exchange. Where it gets sticky is when companies posit a market exchange as a social one- this often repels consumers.

So what’s the point of all of these random anecdotes? From psychological studies in artificial environments to real world examples we can see that consistency is crucial to developing a good relationship with your constituents. Not only does the face of your company and its actual operations have to be consistent, but so does your value proposition and marketing