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Report from the SummitI just got this email from Craig Hansen, who went to the Personalization Summit a few weeks ago and came back talking like a burning bush. With Craig's permission, here it is:
Date: Thu, 19 Apr 2001 09:50:45 -0500 (CDT)
Doc -- I loved your piece on the Personalization Summit. I was there too, hoping to get a sense of the State of the Union. What I saw and heard amazed me, so I had to write an editorial. Please indulge me whilst I spill my proverbial guts. Above all, there was the slogan: ROI -- Return On Investment. Translation: Personalization can help you maximize profits. The implications of Don Peppers' keynote speech to this point were staggering. And insane. Apparently his idea of 1-to-1 nirvana is when every customer is charged the maximum price he or she is willing to pay for every product. It will take time, Peppers admits, but that's where he sees this all leading. Instead of learning from the disasterous mistake Amazon made by pricing DVD's differently for different customers, he declared that it was the consumer that needed the education. Amazon was simply braving the perils of a new frontier -- one that could save us all. I sat in stunned silence, secretly hoping Drucker would burst into the room, loudly crying "Heresy!" Now, I know Peppers is a renowned consultant to industry, including retail. And he's probably forgotten more stuff than I'll ever know. But I can't tell if he has ever stood behind a retail counter, looked a customer in the eye, taken cash, and handed over a product in exchange. That process has remained fundamentally unchanged for thousands of years. Buying and selling is essentially the same now as it was before IP, CRM, EDI, POS, IBM, and CST (Carved Stone Tablets). It's about trust. "I trust that if I give you this much stuff, you'll give me that much stuff." Our whole dad-blamed economy is based on it: Consumer confidence. How can customers trust retailers if pricing technologies make them into adversaries? Ask a real retailer how to maximize profits, and you'll get a balanced two-sided approach: Control costs and control prices. Of course, lowering costs would be counter-productive for the sponsors and exhibitors at the Summit, most of whom have a $1 million-plus target in mind for their products when deployed in a large enterprise. In a meeting with a sales rep from E.piphany (is Network Solutions really registering ".piphany" domains?), I was told "We'll create whatever ROI analysis you need to prove to your management that our pricing makes sense for your organization." Huh? NetPerceptions gave me that same line a year ago, and I was just as befuddled by it. Don't get me wrong -- they are both cool companies with even cooler products. But if they could pull this off it would be the biggest boon to economics since Laffer's Curve. How can their products always show a positive ROI, especially at their prices and in this economy? The answer is simple: Their products may or may not, but their proposals certainly do. Are these the same guys who drafted the revenue projections for their IPOs? Of course, they really want to see customers' revenue numbers so they can arbitrarily price their products, not to estimate ROI. Apparently they are still in denial about the Age of Stupid Money. It's over, guys. The clarion cry, "Want to lower costs? Spend a million dollars!" rings more hollow now than ever. As to controlling prices, retailers use a combination of tools to accomplish this objective. On the main, they use an assortment of products with varying profit margins. They'll use some as loss leaders, and others as margin builders. This way they can publish their prices and set expectations, and technology can certainly play a big part in making these decisions. But when all is said and done, either the customer gets value or the retailer gets no customers. Here's where Peter Drucker's Holy Trinity comes into play: "What business are we in? Who is the customer? What do THEY consider value?" (emphasis mine) Actually, the reason folks don't speak in Druckerisms at these conferences is that they can't get past the first question. But that's another diatribe altogether... The bottom line is that e-commerce shouldn't be a shell game. Good commerce isn't trickery. It's what separates a real business from a mere enterprise. I've written and deployed collaborative filtering software for retail on the web. Most of the technologies out there are based on the theories of Claude E. Shannon, a visionary whose landmark works have been published since the early 1950's. He passed away a few weeks ago, and I think his work has yet to be fully explored or understood. But there is one simple, fundamental concept that all recommendation systems depend on: People know what they are doing. "People who bought this also bought this" implies that "our customers are not idiots." But now some proponents of these very same technologies are telling us, "Your customers actually are idiots. There's a sucker born every minute. And don't worry -- they'll never talk to each other to find out what they paid for your product. And if they do manage to find some way to communicate, still don't worry -- they'll be back. They just need to be educated." If that isn't the textbook definition of a "hard sell", then I don't know what is. You want to try to teach me that it's ultimately in my best interest to pay a higher price for the same product than my neighbor? Smoke crack much? I want to get more value back in products than I'm giving you in money. I want a bargain, but I'll tolerate an even trade. I know that some products in my shopping cart are discounted and some are not. And I know about coupons and promotions. But at the end of the day I want to rest assured that someone else isn't paying less just because he knows the secrets of beating the very system that's supposed to be helping me. If "personalization" means painting a big red target on my hat and making me wear an "I'm With Stupid -" T-shirt, then I'll choose anonimity. As another presenter at the Summit correctly noted, there's an enormous gulf between the customer and the retailer to begin with. One wants to pay nothing and get everything. The other wants to give nothing and get paid everything. The retailer always has to make the first move because the customer has other options. And that move must be towards the customer, not away. The retailer must earn the trust of the customer. That's the immutable nature of the game since the days when monkeys danced around the Monolith, and no amount of technology or education will ever change it. -- Craig W. Hansen EVP, Development NetCentral, Inc. [NetCentral, Inc. is a Nashville-based internet store builder. A wholly-owned subsidiary of Books-A-Million, Inc., NetCentral builds and maintains Booksamillion.com and other sites, as well as the book distribution and fulfillment systems for Wal-Mart.com.]
Note: the links are ones I added, and were not in the original text. Thanks, Craig. It's a great editorial. — Doc
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