I think that user-generated reviews are one of the most important and useful social media tools that have become prevalent in recent years. These days, it seems like every website that allows you to make purchases online also gives you the tools you need to leave feedback and assign ratings that other customers can see. Both buyer and sellers can benefit from these tools, which is probably why they have become so entrenched in e-commerce. Customers are able to make more informed decisions by reading about the experiences that others have had with the product or service, while sellers receive the feedback necessary to improve their offerings quickly.
Focusing on the seller side, one of the main benefits companies can derive from user-generated reviews is the ability to gain insights from their customers. The customer perspective is one that it can be very difficult for a company to capture, particularly throughout the entire product life-cycle. Using traditional methods, companies typically talked to their customers primarily during product development to aid in the creative process, but after this step they received only limited feedback. User reviews allow customers to voice their opinions and provide key insights the entire time the product is on the market, which can help companies identify issues and successes. Particularly adept Web 2.0 companies can even reach out to customers that have had negative experiences with their offering, quickly turning a scathing denouncer into a loyal ally. Companies can also gain insights on competitors and complimentary products through their reviews on websites like amazon.com where substitutes and associated purchases are recommended, and this information can be utilized to further enhance the existing product in future iterations.
The user-generated reviews also go a long way towards enhancing the customer’s experience with the product they ultimately purchase. Obviously, the biggest impact of the reviews on the customer experience takes place during the shopping phase, as consumers with various amounts of information on what they are looking for scour the internet in search of the product they need. Companies that address their customers’ need for information through user reviews have a clear advantage over their competitors. This is especially true for companies providing a service, because there is not an equivalent website like amazon.com for services (amazon.com handles mostly products, and every product can be reviewed). In addition, it is perhaps more important for customers to learn from fellow consumers about their experiences with services more than products, because often a service cannot be sampled or fully understood unless it is experienced. For example, I never book hotel rooms or take my car in for repairs without first reading over user reviews to make sure I know what type of service I can expect. This greatly enhances my experience in these areas of business, because I have easy access to the information I need and can compare it with info about other competitors. Overall, the user reviews greatly simplify the process of comparison shopping and give customers like me a much more complete picture of what to expect from the product or service.
Another example of the social media tools that are helping companies gather more information about their offerings are the analytical tools Google Trends provides that detail search engine statistics recorded about various keywords. I plugged in the name of one of my favorite directors, Hayao Miyazaki, and found some interesting results. Miyazaki is a Japanese filmmaker who creates 2D, animated films that are distributed across the world and are consistently highly regarded. I would have expected most of his search results to have come from Japan, but to my surprise Japan was not even listed in the top ten regions, cities, or languages for his searches. Instead, it turned out that countries like Finland, Sweden, and Singapore were the ones most interested in his works. This information would obviously be very important when planning for Miyazaki’s next movie premier and promotions, as it indicates some unexpected places that his biggest fans may reside. Other companies could use this type of information in similar ways, identifying target markets and possible points of expansion. Other features of Google Trends, including a search volume index and articles associated with times of peak search volume, would provide companies with even more useful information that they can use to better understand their customers and market trends.
Wednesday, November 11, 2009
Wednesday, November 4, 2009
Walmart: Dominence through Information
When people think about Walmart, they think of low prices and a wide variety of goods. Their goods are not considered to be of very high quality, despite the fact that they are often no different than what you might find at Target or Best Buy, but the low prices justify this perceived lack of quality. This is the type of experience that customers expect when they enter a Walmart store. But what they often neglect is that these low prices are only possible through Walmart’s data collection, IT infrastructure, and supply chain efficiency.
Walmart has been very successful at leveraging their extensive amount of data and transforming it into useful information that can help them create a customer experience that provides important competitive advantages. The low prices that are associated with Walmart are only possible because of the extensive data they collect on every purchase. Their costs are dramatically reduced because of their excellent supply chain management, which emphasizes minimal inventories and just-in-time delivery of goods. Customers expect the shelves at Walmart to be fully stocked with the goods they need, so an information system that knows what product inventories are being depleted and can make predictions about future demand is incredibly valuable for creating an ideal experience where all of the customers’ needs are met. Personally, I can remember a number of incidences at HEB where I would be looking for a particular item that would be sold out, and as a result I would be required to make an additional trip to the store at a later time to finish my grocery list. I cannot remember ever experienced this when doing my shopping at Walmart. I also tend to get through the check-out lines at Walmart faster than I do at HEB, which, as the article mentions, is likely due to the fact that Walmart has collected data on when their busy and slow times occur. These things has saved me time and money, and enhanced my customer experience at Walmart; if the HEB weren’t so much closer to my house I would strongly consider doing my grocery shopping at Walmart because of these advantages.
Because Walmart collects such an extensive amount of data on its customers, many have argued that it threatens consumer privacy. While this argument has many valid points, I am personally not bothered by these facts. I understand that there is a tradeoff between the lower prices Walmart offers and the amount of data they must collect (more data = lower prices), and I am willing to make such a sacrifice in this case. I feel that the chances are very small that I would be damaged by Walmart’s usage of my information. As a result, I do not worry that Walmart may use my information for purposes that I would find distasteful, because if they did anything that truly crossed the line people would become outraged and shop elsewhere, thus hurting Walmart’s profitability. Their data collection policies have raised the ire of numerous people, but they have yet to do something that has had a dramatic impact on their bottom line. As long as the majority of people are happy or blissfully ignorant of the fact that they are being studied, there will be little incentive for Walmart to change its policies.
As the largest retailer in the world, it is easy to say that Walmart commands a great deal of power. This obviously strengthens their position within their industry, and hurts their suppliers in many ways because the suppliers must be submissive to Walmart’s will. If Walmart demands lower prices or shipping costs, their suppliers have little choice but to comply, as otherwise Walmart will simply find someone else to do the job. Suppliers must also invest additional resources into technological innovations and hire highly skilled employees to keep up with the requirements of Walmart’s information systems, thus creating an addition cost for the suppliers. However, on the positive side, while the suppliers may generate less profitability per item as a result of Walmart’s demands, their overall profits are likely to be quite high because they can sell a much greater volume of goods through Walmart. They are also likely to develop competitive advantages in their field because of the technological and performance excellence that Walmart demands of all its suppliers.
Walmart has been very successful at leveraging their extensive amount of data and transforming it into useful information that can help them create a customer experience that provides important competitive advantages. The low prices that are associated with Walmart are only possible because of the extensive data they collect on every purchase. Their costs are dramatically reduced because of their excellent supply chain management, which emphasizes minimal inventories and just-in-time delivery of goods. Customers expect the shelves at Walmart to be fully stocked with the goods they need, so an information system that knows what product inventories are being depleted and can make predictions about future demand is incredibly valuable for creating an ideal experience where all of the customers’ needs are met. Personally, I can remember a number of incidences at HEB where I would be looking for a particular item that would be sold out, and as a result I would be required to make an additional trip to the store at a later time to finish my grocery list. I cannot remember ever experienced this when doing my shopping at Walmart. I also tend to get through the check-out lines at Walmart faster than I do at HEB, which, as the article mentions, is likely due to the fact that Walmart has collected data on when their busy and slow times occur. These things has saved me time and money, and enhanced my customer experience at Walmart; if the HEB weren’t so much closer to my house I would strongly consider doing my grocery shopping at Walmart because of these advantages.
Because Walmart collects such an extensive amount of data on its customers, many have argued that it threatens consumer privacy. While this argument has many valid points, I am personally not bothered by these facts. I understand that there is a tradeoff between the lower prices Walmart offers and the amount of data they must collect (more data = lower prices), and I am willing to make such a sacrifice in this case. I feel that the chances are very small that I would be damaged by Walmart’s usage of my information. As a result, I do not worry that Walmart may use my information for purposes that I would find distasteful, because if they did anything that truly crossed the line people would become outraged and shop elsewhere, thus hurting Walmart’s profitability. Their data collection policies have raised the ire of numerous people, but they have yet to do something that has had a dramatic impact on their bottom line. As long as the majority of people are happy or blissfully ignorant of the fact that they are being studied, there will be little incentive for Walmart to change its policies.
As the largest retailer in the world, it is easy to say that Walmart commands a great deal of power. This obviously strengthens their position within their industry, and hurts their suppliers in many ways because the suppliers must be submissive to Walmart’s will. If Walmart demands lower prices or shipping costs, their suppliers have little choice but to comply, as otherwise Walmart will simply find someone else to do the job. Suppliers must also invest additional resources into technological innovations and hire highly skilled employees to keep up with the requirements of Walmart’s information systems, thus creating an addition cost for the suppliers. However, on the positive side, while the suppliers may generate less profitability per item as a result of Walmart’s demands, their overall profits are likely to be quite high because they can sell a much greater volume of goods through Walmart. They are also likely to develop competitive advantages in their field because of the technological and performance excellence that Walmart demands of all its suppliers.
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