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Think about the way you buy products and services today compared to just 10 or 20 years ago. Whether you are buying a book (like this one), or renting a movie, or finding a ride to the airport, the buying experience has undergone a total transformation.
Today, instead of being forced to buy at a place and time that is convenient for the company, you can now buy just about anything from the comfort of your own home, or from your office, or from just about anywhere (provided you have an internet connection). And best of all, you can buy in real time or whenever is most convenient for you, the customer.
Want to rewatch your favorite movie? Just a few years ago, that meant trudging to a video rental store and waiting in line so you could rent a DVD or VHS tape. Today, with just a few clicks, you can watch all of your favorite movies and TV shows on-demand—no waiting in line.
Ready to catch that ride to the airport? Just a few years ago, that meant walking to a cab stand, or trying to hail a cab from the sidewalk (not as easy as it sounds), or calling a cab company the day before, being put on hold, having to call back in the morning, and then never knowing for sure whether someone would show up. Today, you can schedule a ride on your phone with the push of a button and have it arrive at your door in a few minutes. (And you can track your driver’s progress on a map inside the app so you know exactly when you’ll be picked up.)
In this real-time, on-demand world we now live in, where access to an endless supply of products and services is always just a few clicks away, the marketers and salespeople vying for our business need to come to terms with a new, fundamental truth: The balance of power has shifted.
Today, customers have all the power. And the companies that end up winning in this new world will no longer be the ones that own the supply, but the ones that own the demand. Here are three key factors that led to this monumental shift.
Gone are the days when companies could keep information about their products and services locked up and hidden away from their potential customers. Today, thanks to search engines, review websites, and social media recommendations, customers no longer need to rely on marketers or salespeople in order to educate themselves and make informed purchase decisions.
Instead of simply taking a company’s word for it that their product or service is worth the price, or can solve a particular problem, today’s buyers can consult a wide variety of resources and opinions in order to paint a fuller picture of what to expect from their purchase. And, of course, today’s buyers aren’t just researching and evaluating the potential benefits of the actual products; they are also evaluating the companies themselves and the level of service they provide, which leads me to factor number two:
The second reason why customers have all of the power today: because real-time interactions have become the default. Today, billions of people around the world use real-time messaging for their day-to-day communication. More and more of us are chatting with our friends and family on messaging apps like WhatsApp, and at work we are chatting with our coworkers via messaging-powered collaboration tools like Slack.
As a result of this shift in how we communicate, coupled with the fact that we can now order so many products and services on-demand with just a few clicks, our customer expectations have evolved. We have become conditioned to expect real-time responses when we have questions and to expect instant solutions when we have problems.
Regardless of the product or service you are in the market for, today there are usually at least a handful of options you can choose from as a buyer. And in many cases, there are dozens of competitors all fighting for your dollars. (Just go to any supermarket and count how many different potato chip brands you see on the shelves.) As customers, that means we have more choice and can be more selective. As marketers and salespeople, it means that we can no longer expect our companies to win in a certain category just by “showing up” with our product—even if it’s a good product. Owning the supply isn’t enough.
Just look at the razor company Gillette, which dominated the razor industry for more than a century. Gillette’s success stemmed from owning the design of their patented safety razor, owning the distribution centers for getting their razors out to retailers, and owning the relationships with those retailers. In other words, Gillette owned the supply. And for decades, if you wanted to buy a razor, you had no choice but to go to a brick-and-mortar retailer, like CVS or Walgreens, where you would inevitably find Gillette razors for sale on the shelves.
Then, in 2011, Dollar Shave Club appeared on the scene and turned Gillette’s supply-driven model on its head. Instead of going head-to-head with Gillette and competing for shelf space, which was the approach competitors like Schick and BIC had taken, Dollar Shave Club went around the retailers and began selling their razors directly to consumers. To generate buzz for the new service, they crafted memorable marketing campaigns that stressed how expensive the razors in the stores were, how much of a pain it was to remember to buy them, and how all of the new features the supply-focused razor companies were adding to their products (like vibrating handles) were worthless. Then Dollar Shave Club presented their subscription service, which offered premium (but no-frills) blades at a lower price, as the solution. Instead of focusing on owning the supply, they focused on owning the demand.
In 2016, after years of sustained revenue growth, Dollar Shave Club was acquired by Unilever for a reported $1 billion. Over that same time period, 2011 through 2016, Gillette’s North American market share dropped from 71 percent to 59 percent.
For years, companies have been able to find success through creating amazing products and building loveable brands. But in a world of infinite supply, an amazing product and a loveable brand are no longer enough. In order to gain an advantage over the competition, you also need to provide incredible service. Those are the three moats you need to build around your business: product, brand, and service.
Today’s customers care not only about what they’re buying (product) and who they’re buying it from (brand), but also how they’re able to buy (service). They care about the buying process itself. And if that process takes too long, or feels too complicated, or doesn’t meet their expectations, it’s likely that those potential customers will go spend their money with a competitor.
Ultimately, Gillette was able to recognize that they needed to adapt to this fundamental shift in the way people prefer to buy. In 2017, they launched their own direct-to-consumer razor service, the aptly named Gillette On Demand. And while Gillette has (at least for now) been able to weather the storm brought on by Dollar Shave Club and other razor subscription services, not all supply-focused companies have been so fortunate.
When Amazon first began selling books online in 1995, brick-and-mortar “superstores” dominated the industry. Borders, in particular, was generating around $1.6 billion in annual sales. At a time when there was a growing concern that superstores like Borders would disrupt smaller, local bookshops, Amazon came along and pulled the rug out from under the entire industry. By 2006, Amazon had surpassed Borders in annual revenue (see Figure I.1), and by 2011, Borders, the former book retail juggernaut, was out of business.
FIGURE I.1 Tracking the rise of Amazon (and the decline of Borders) based on annual revenue growth.
Of course, the downfall of Borders cannot be solely attributed to the rise of Amazon, but it undoubtedly played a pivotal role. Amazon reinvented the way people buy books, and, with the launch of their Kindle e-reader in 2007, they also reinvented the way people read books. Before Amazon, book buyers had no choice but to go into brick-and-mortar stores, where they could find thousands of paperbacks and hardcovers lining the shelves. After Amazon, buyers could search through millions of titles online, and instead of having to fill up their own shelves at home with physical copies of books, buyers could have digital copies of books sent instantly to their e-readers.
While Borders did try to adapt to this new paradigm, they never fully embraced it. For example, in 2001, instead of launching their own online bookstore, Borders opted instead to outsource online sales to Amazon, a deal which lasted until 2007. And by the time Borders launched an e-book store in 2010 to compete with Amazon’s Kindle Store, it was simply too little, too late. Today, Borders is no more, while Amazon (which is selling much more than just books these days) is valued at more than $800 billion.
When Netflix launched in 1997 with its video rental by mail service, Blockbuster was the undisputed king of the video rental industry. Between 1985 and 1992, Blockbuster grew from one location in Dallas to more than 2,800 locations around the world. In 1994, an acquisition by Viacom placed the company’s value at $8.4 billion. Back then, no one could have predicted that by 2010, Blockbuster would be bankrupt . . . or that by 2011, Netflix would be pulling in more annual revenue than the once-undisputed king of the video rental industry (see Figure I.2).
FIGURE I.2 Tracking the rise of Netflix (and the decline of Blockbuster) based on annual revenue growth.
Once again, we are looking at a case of a company failing to adapt to the new paradigm. As more and more customers began looking online to meet their video needs, first with rental by mail services, and then with on-demand streaming, Blockbuster stuck with the model they already knew. Instead of evolving the service they were providing in line with what customers wanted, they rested on the laurels of their well-known brand. And they banked on the fact that they owned the supply. By the time Blockbuster did catch on to how customer expectations were changing, launching their own Netflix-like service in 2004 and getting rid of late fees (which customers hated), it was too late. Netflix had already stolen the demand.
What makes this story especially poignant is the fact that, early on, Blockbuster had an opportunity to make an investment in the future of the company, but let it slip away. Back in 2000, Netflix CEO Reed Hastings reached out to Blockbuster and proposed a merger deal. Hastings wanted Blockbuster to acquire Netflix for $50 million, and as part of the deal, the Netflix team would manage Blockbuster’s online brand. As you already know, that $50-million deal never happened—Blockbuster turned Hastings down. Today, Netflix is worth more than $150 billion.
For more than a century, taxicabs were the go-to mode of transportation for people trying to get from point A to point B without having to worry about finding parking or dealing with public transportation schedules. And they were painted yellow—a tradition started in 1908—to attract the attention of potential riders. But since the early 2010s, when Uber and Lyft launched their ridesharing services, traditional taxi companies have been under siege (see Figure I.3). In 2017, Uber surpassed New York City’s yellow taxicabs (which are taxicabs that have been licensed by the city’s Taxi and Limousine Commission) in trips per day, and the gap has continued to grow. Lyft has been gobbling up the yellow cab market share as well.
FIGURE I.3 Tracking the rise of Uber and Lyft (and the decline of yellow cabs) in New York City based on trips per day.
Even though taxicabs have historically owned the supply of rides, Uber and Lyft were able to generate more demand through offering easy-to-use apps that made scheduling and paying for rides a breeze. Customers saw the value immediately: no more struggling to hail a cab, no more counting out cash or having to fiddle with unreliable credit card machines. You just upload your payment information to the app once and you’re ready to order rides on-demand.
In 2013, the cost of a New York City taxi medallion—the license required to operate a yellow taxicab—peaked at $1.3 million. By 2017, it had sunk to $241 thousand—one-fifth of what it was worth just a few years before. Uber and Lyft (like Netflix and Amazon before them) have turned their industry on its head, and they did it by appealing to the preferences and expectations of their customers in order to create a superior customer experience. Both companies now have multi-billion-dollar valuations.
For the past two decades, I’ve been building software for marketing and sales teams, first at Compete, then at Lookery, then Performable, then HubSpot, and now at Drift. I’ve had thousands of conversations with marketers and salespeople from all around the world. I’ve gone into their offices and studied their habits and figured out what their pain points are. During this time period, I’ve watched as the balance of power has shifted from supply to demand, and from company to customer. I’ve watched as companies like Amazon, Netflix, and Uber have figured out how to deliver the real-time, on-demand buying experiences today’s customers have come to crave. And finally, a few years back, it dawned on me:
The way we’ve been doing marketing and sales is broken. It was created for a world that no longer exists.
A visit to just about any business-to-business (B2B) or software as a service (SaaS) website will reveal the truth: Companies the world over are blatantly ignoring their potential customers. Instead of providing a real-time, on-demand buying experience for people who come to our websites and show interest in our products and services, we have been forcing people to fill out lead capture forms and wait for follow-up emails or phone calls. Instead of letting our customers buy when it is convenient for them, we’ve made it all about us. And we have become so obsessed with data and analytics and filling out spreadsheets and tracking every little detail that we have forgotten about the people we are serving.
The good news? The solution here is simple. In fact, it’s been staring us in the face for centuries. As marketers and salespeople, we need to get back to basics. We need to return to the core of what the buying process has always been: a conversation between buyer and seller.
In your hands right now, you hold the playbook for harnessing the power of real-time conversations for your business: Conversational Marketing. Those new to the world of marketing and sales will come away with a step-by-step understanding of how you can start capturing, qualifying, and connecting with leads on your website through having real-time conversations. More experienced readers will gain a deeper understanding of how people prefer to buy in today’s real-time, on-demand world, while also discovering new strategies and tactics that have been missing from the traditional marketing and sales playbook.
Today, more than 100,000 businesses are embracing the conversational marketing and sales methodology and adapting to the shift from supply to demand. But this is still just the beginning. I’m happy you are here to be a part of it.
David Cancel (@dcancel)