What can we learn from Open Consumer Feedback?

The origins of Open Consumer Feedback

The Open Consumer Feedback has its roots in the consumer satisfaction survey. Surveying customers for their satisfaction is a relatively recent industry. A pioneer of the sector, JD Power, started his eponymous company in 1968. I am grateful to David Bonbright from Keystone Accountability for sharing the origin story of JD Power with me. It took more than a decade for the consumer feedback industry to take off in the 1980s. Until then, large companies were focused on their brands, their products and the logistics required to deliver them. The satisfaction of customers, let alone their feedback, was not taken seriously. After all, what could the customer say about a car that the engineering team that built it didn't already know and know much better?

In those days, sales were considered the most meaningful and reliable proxy for satisfaction. JD Power had pioneered benchmarking between cars but most products and services could not easily be compared. It was only in the 1980s that the customer - and their experience - were given a starring role in the management thinking and practice. This is when the customer satisfaction industry took off.

The Open Consumer Feedback revolution started in the mid-1990s. By the 2010s it became a multi-billion dollar industry, upending many established service sectors. The pioneers were the online retailers Amazon (founded in 1994), Ebay (1995) and Alibaba (1999).

By the mid-2000s entrepreneurs recognised that the power of Open Consumer Feedback could be harnessed for feedback on restaurants and hotels as exemplified by TripAdvisor (2000), for booking hotel rooms through the likes of Hotels.com (2002) and Booking.com (2005); for consumer reviews with Yelp (2004); to stay in people's homes through Airbnb (2008); to hitch a ride through BlaBlaCar (2006); or to book taxis through Uber (2009) or Lyft (2012).

The three features of Open Consumer Feedback

Open Consumer Feedback platforms were all born on the web or on smartphone applications. They are all what I would call Type C feedback systems, as I described them in an earlier post.

Most are located in the "sweet spot", with the exception of the likes of Yelp and TripAdvisor, which are the "tough spot."

I am going to suggest that while they are all technology enabled they share three common features, which are what truly differentiates them from their predecessor, the consumer satisfaction survey.

The technologies of feedback will continue to evolve, but these three features are likely to be stable for some time:

  1. Autonomy: the feedback system is not controlled by the direct service provider

  2. Transparency: the key results are fully visible to buyer and seller alike

  3. Positive Feedback Loops: The most important features is that they trigger multiple positive feedback loops both for the seller and the buyer. Of the three features, this one is the most important.

None of these features exist in traditional customer satisfaction surveys.

Different aims

The traditional consumer satisfaction survey is meant to achieve two things:

  1. To assess whether a customer has a positive experience with a company's goods or services; and

  2. To assess the likelihood of changes in future purchasing behaviour (while sales are a proxy for current levels of satisfaction, customer satisfaction has been shown to be a reliable indicator of future sales, especially when benchmarked against rivals).

Drilling down further, if a brand has many enthusiastic customers then these are likely to be repeat customers and are also likely to recommend the brand to their friends and family, which is the strongest form of marketing a brand can have; in turn, if a brand has a core group of dissatisfied customers, they are likely to do just the opposite.

Open Consumer Feedback has a different overall purpose. Its aim is to generate trust. We can suggest that trust is a formula, combining Autonomy, Transparency and Positive Feedback loops. It may even be defined as a algorithm:

A * T * P = TRUST

Open Consumer Feedback is a trust-building machine.

Booking.com, Ebay, Amazon, Airbnb, etc. are platforms that build trust between a seller and a buyer, which makes sales possible. They give visibility to the unknown, often unbranded service providers and products that would under any normal scenario never have been able to attract a wide customer base. That levels the playing field and makes the market far more competitive for established brands.

These trust-generating platforms makes it possible for a single woman to travel to Buenos Aires for the first time and stay in a stranger's home, confident that she is not only getting a good deal but that she will also be safe. I trust that when I transfer EUR 190 to someone I have never met for a product I haven't touched that I will receive the product that has been advertised.

Trust is not perfect and will by definition sometimes be abused, both by sellers and buyers. Nonetheless, it is such a powerful force that it has made possible entirely new industrial and service categories.

#OpenConsumerFeedback #Autonomy #PositiveFeedbackLoops #Transparency

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