The Principles of VRM

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Doc did a foundation-setting presentation yesterday at #vrm08, and clearly laid out the key principles of VRM in an easy-to-grok format. 

  1. VRM provides tools for customers to manage relationships with vendors. These tools are personal. They can also be social, but they are personal first.
  2. VRM tools are are customer tools. They are driven
    by the customer, and not under vendor control. Nor to they work only
    inside any one vendor’s exclusive relationship environment.
  3. VRM tools relate. This means they engage vendors’ systems (e.g. CRM) in ways that work for both sides.
  4. VRM tools support transaction and conversation as well as relationship.
  5. With VRM, customers are the central “points of integration” for their own data.
  6. With VRM, customers control their own data. They control the data they share, and the terms on which that data is shared.
  7. With VRM, customers can assert many things. Among these are requests for products or services, preferences, memberships, transaction histories and terms of service.
  8. There is no limit on the variety of data and data types customers can hold — and choose to share with vendors and others on grounds that the customer controls.
  9. VRM turns the customer, and productive customer-vendor relationships, into platforms for many kinds of businesses.
  10. VRM is based on open standards, open APIs and open code. This will support a rising tide of activity that will lift an infinite variety of business boats, and other social goods.

These principles have a number of implications.  These are:

  • A free customer is more valuable than a captive one
  • Markets won’t be free until customers are free
  • VRM tools are personal tools — they benefit the individual first
  • VRM tools provide individuals with ways to manage relationships
  • The individual is the central point of integration

There are more; here’s the video (for the folks reading on RSS).  The video is also embedded below.  Take a look.

(Thanks to Tom Guarriello for shooting this!)

Rubber, Meet Road

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Have just arrived in Boston (Cambridge, actually) for the first VRM (Vendor Relationship Management) workshop, which runs July 14-15, 2008.  ProjectVRM is under the auspices of the Berkman Center at Harvard, and is a project being spearheaded by Doc Searls as an effort that will enable customers and vendors to engage in more mutually beneficial relationships.

The workshop is a coming-out party of sorts, as it is the first dedicated get-together of the people around the world who have been working on not only defining VRM, but beginning to make it a reality.  Up until now, all the VRM get-togethers were grafted on to other (important and complementary) activities like the Internet Identity Workshop.  This meeting is VRM’s passage into toddlerhood and first steps.  (Too soon, it’ll be asking to borrow the car, I’m sure.)

There are a few things in particular that I personally am hoping to help drive forward over the next couple of days.  The first is to nail down a solid working model of what it means for something to be able to call itself "VRM."  This project has some legs, and without the above, there will be a surfeit of products and/or services coming into the market that will attempt to connect themselves with the effort.  That’s fine, but there needs to be a standard and unambiguous way of separating the wheat from the chaff, and separating the architecture from the marketecture.

The next goal related to code.  Over the next couple of days, I want to both learn about and, more importantly, determine the best ways we can contribute to the code that’s going to need to be created to enable VRM.  What will this code do?  It will enable us, as individuals, to be have increased control of our digital information, and independence regarding its use (rather than having every bit of our digital identity strewn about the tens or hundreds of vendor silos in which it currently lives, which is the current state-of-practice, unfortunately).

There are a number of instances where effort is starting to pay off.  A couple of examples:

Also, some great thinking here from Alan Mitchell: "Is VRM a Phenomenon?"

This group is going to get a lot of work done over the next couple of days.  Looking forward to rolling up the sleeves and digging in.

The New TypePad iPhone App

Sitting at SFO waiting for my flight to Boston, so decided to test out the new Iphone app for posting to TypePad, after reading about same from Christopher Allen.

Later: Posting is ok, but the app did some funky things with the image it uploaded.  I had to do an after-the-fact cleanup and move the image over the right, etc.  Looks like the app is ok for quick-hit posts, but would be challenging for longer-form things.  Also, couldn’t figure out how to put in links from the app, so added the link to ChristopherA up there manually.

Big Discount ($250) for Friends of Cerado

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Our friend and WOM guru Andy Sernovitz is hosting a small-group word
of mouth marketing seminar. Usually he only does private training for
companies at a very large price, so this is a rare chance for 50 people
to get the best introduction to word of mouth that there is.

We’ve arranged for a $250 discount for our clients and friends. Use code "welovecerado" when you register.

This is a very practical, hands-on course. Here’s what’s happening:

  • Master the five steps of word of mouth marketing
  • Construct an action plan that your company can start using the very next day
  • Get the same training that big corporations (Microsoft, TiVo, eBay) have received — for a fraction of what they paid
  • Know how to translate word of mouth marketing into real ROI
  • Participate in an active, intense day of practical brainstorming (not boring theory)
  • Learn from Andy Sernovitz, the guy who literally wrote the book on word of mouth marketing

Andy promises you will learn a repeatable, proven marketing
framework that is easy to execute, affordable, and provides measurable
results within 60 days.  Besides, he’s a great guy.  And it’s in Chicago.  (If you’re going and you’re not from Chicago, drop me a note…there are a bunch of killer places for food and fun that are off the beaten tourist path that I can point you toward.)

More information: http://events.gaspedal.com

Word of Mouth, Chicago: July 30 and September 4

NetPromoter and Customer Recommendations: Is It Really The “Ultimate Question?”


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  Originally uploaded by Leo Reynolds.

The May 2008 issue of Fortune Small Business contained a breathless article on the "Net Promoter Score," which is defined thusly in the article:

"First, ask you customers to rate you on a scale of 0 to 10 based on the question ‘How likely is it that you would recommend this company to a friend or colleague?’  Then sort the responses into three groups: promoters (9’s and 10’s), passives (7’s and 8’s), and detractors (0’s through 6’s).  The percentage of promoters minus the percentage of detractors equals your score.  A company with 75% promoters and 15% detractors, for example, would have an NPS of 60."

Net Promoter Score (NPS) was vaulted into the mainstream in a 2006 book entitled "The Ultimate Question" by former Bain & Co. partner Fred Reichheld.

Is NPS a panacea?  The data is mixed.  On one hand, Fortune reports that "the average US company has an NPS of about 15" and telecom/cable companies are "real dogs" with an NPS of -4…yes, NEGATIVE four.  So from that perspective, things seem to synch with conventional wisdom (and personal experience).  On the other hand, much question has been given to the statistical validity of NPS.

In particular, a heated conversation thread hosted by the Journal of Marketing notes the following:

"1) We did not find Net Promoter to be a good predictor of growth at all
when attempting to replicate Reichheld’s methodology. We find this
quite strange given the overwhelming evidence Reichheld reports
regarding Net Promoter’s linkage to growth.


2) The most troubling finding from our research, however, is that we
found very strong evidence of research bias in the research reported by
Reichheld in support of Net Promoter. In particular, we were able to
replicate a subset of Reichheld’s reported data for his best case
scenarios and compare it to a metric he claimed was examined and found
to have a 0.00 correlation to growth, the ACSI. Our findings clearly
show that when using Reichheld’s own data, Net Promoter wasn’t superior
to the ACSI. It is virtually impossible to imagine a scenario other
than research bias as the cause of this finding.


This is a VERY SERIOUS problem."

Going back to the Fortune article, they interviewed 20 companies, all of which had positive things to say about NPS, with key note given to its simplicity and ability to highlight particular customer issues.

But I’d be very interested in hearing from you.  What have been your (or your organization’s) experience with Net Promoter.  Best thing since sliced bread, snake oil, or a mixed bag?  Or, put another way:

"How likely is it that you would recommend the metric of Net Promoter Score to a friend or colleague?"

Thoughts?