The New NEW Technology Economy: The Customer Is God
If one good thing is going to come out of this recession, it’s that the dot-com’s will not just have simply died, but their roots will have been destroyed as well. Most people had their own reasons to despise the whole dot-com thing, but there was one universally bad trait about them that has not been discussed until now: dot-com’s were bad for consumers in the long run.
Why? Because most of their strategies involved building the largest customer base possible, with far less emphasis put on treating those customers well. And if that ploy had succeeded, it would have been very bad indeed for consumers.
Consumers. What a terrible name. I’ve used it three times in this article already. What a belittling term. Yet we take it for granted now. Each of these so-called consumers are individuals who work hard to earn the money they spend on a given product or service. And yet technology companies seem to forget that.
Our company, Stardock, was lucky. It was lucky because it nearly went out of business in 1998. How is that lucky? Because we discovered a secret. A vital secret:
Treating customers as gods matters.
You see, back in 1994 our company was an OS/2 Independent Software Vendor, or ISV. We made software for IBM’s OS/2 operating system. None of us had business backgrounds. We were engineers and techies. We brought our own attitudes and opinions to the company, and one of those attitudes was that we hated the way many tech companies treated us. And so when we set out on OS/2, we wanted to make sure we treated our customers as more than just customers, but as part of the team.
Our customers are our friends in a very literal sense. When we blew a beta date on one of our games, we sent our pre-paying beta testers a free copy of another game as a surprise, and then a few weeks later we released the beta. There was no PR calculation, no scientific thought put into it. We just felt bad and wanted to send them something so that they had a new game to play for Christmas. These were the kinds of things we did. We made sure our customers understood that we cared about them.
And then in 1997 the OS/2 market collapsed. Windows NT 4.0 happened, and the exodus from OS/2 was massive. With a year our revenue from OS/2 software dwindled to almost nothing.
This was actually the best thing that ever happened to us, because we discovered a business reality that apparently escaped the dot-com’s—that customer loyalty is just as important as customer quantity.
You see, in 1998 we had to switch gears and move into the Windows market. But we couldn’t get any venture capital. We couldn’t even get bank loans. We were finished. It was over. We were getting our resumes out. What’s more, we knew that once we jumped into the Windows market with Object Desktop for Windows, our desktop enhancements could very well fall prey to Microsoft when it developed new versions of Windows. That is, the ideas we would come up with and implement for Object Desktop for Windows might end up as “features” in future Windows editions.
So we decided to do something new—sell our product as a subscription. For $50, users would be able to buy a one-year subscription for Object Desktop that included all current features, plus everything we made for it in the following year. And they could keep the product even if they didn’t re-subscribe (something I’ll talk more about later).
Now there’s a little drawback to this. The first year Object Desktop for Windows was on the market, we had zip. Object Desktop was just a bunch of promises and partially functioning code in a lab. It required users to pay $50 for a bunch of software sight unseen. And it would require a lot of them to do it, because creating all this software was going to be expensive and time consuming.
But our customers, formerly on OS/2 but now on Windows, purchased it by the thousands. They remembered us and how we treated them. They trusted us. They thought of us in the same way we thought of them—as friends. Stardock wasn’t just another software company to them; we were friends, and if we said we were going to create these things, then they accepted the fact that we would.
And we did. By the end of 1999, we had produced ControlCenter, WindowBlinds, Tab LaunchPad, ObjectEdit, and a bunch of other things. Their trust paid off. We were able to create a product without any venture capital.
Customer loyalty really matters. If you treat people fairly, with respect, as individuals instead of “consumers,” you will earn their respect and trust in return.
Which brings us back to those dot-com’s. They really screwed things up. They often treated their customers with contempt. What we learned isn’t that the customer is always right—they’re not, and I have argued plenty of times online with them when I felt they were wrong. But we always treated them as individuals whose voices needed to be listened to if not agreed with.
The dot-com’s, on the other hand, came in and wanted to show results fast, and that meant grabbing as many bodies as possible without a care as to how they’d be treated. Even worse, the dot-com’s came up with get-rich-quick schemes that have since required an extraordinary amount of damage control by the rest of us.
Take subscription software, for example. In 1998, we were doing this electronically. Arguably, we were the first ones to provide such an electronic .NET mechanism. (In fact in 1999 we launched Stardock.NET – a year before Microsoft’s .NET initiative.) But the dot-com’s, not wanting to earn their customers’ loyalty but instead to simply tie their hands, came up with subscription systems that would require ongoing patronage or else their software or service would be useless.
If magazines worked under their system, Newsweek would take all your existing issues back if you didn’t renew your subscription. That’s BS. You paid for those magazines. They’re yours. If a magazine wants you to re-subscribe, then it better treat you well. That means it better keep providing value. It means the people who work there better listen to you. Put simply, they better earn your loyalty.
Unfortunately for the dot-com’s, they didn’t learn that in time. I can think of one remaining dot-com which has done a good job retaining customers: Amazon.com. But they’re an exception to the rule for the most part. The successful dot-com’s caught on that individual customers matter. Ten thousand very loyal customers are better than 100,000 indifferent customers, because the loyal ones will be there for you at crunch time. And many a dead company mistakenly believed they’d never experience a crunch time.
Probably the worst thing dot-com’s did was to make customers cynical. Many a new Stardock customer is quite wary of the things we do at first, because they think it’s a marketing or PR ploy. The dot-com’s really did a job on “consumers.” Think about it—when your barber or hair stylist asks how your wife or husband is doing, you don’t think it’s a ploy. That’s because the barbers and hair stylists of the world know something that the dot-com execs never learned—that people are individuals, not “consumers” to be harvested.
I predict that the NEW new economy will be built on the premise that, while the customer isn’t always right, he or she is an individual who always deserves respect. Customers should be treated as good friends, not simply as passing acquaintances. If they have a problem, find out what it is. Talk to them. It doesn’t mean kissing up to them; respect is a two way street, and you can’t build loyalty and friendship without respect. But if you want respect, you have to give it. That means treating those people with high regard, not as cattle.
The successful technology companies have always learned to treat customers as individuals, as lifelong partners. This means looking at the long term. It means building a long-term relationship with them and earning their trust and respect.
The NEW new economy won’t be good for “consumers.” But it’ll be great for people.
Brad Wardell is the President and CEO of Stardock (www.stardock.com). He’s known to hang out on Usenet and various on-line communities talking directly to customers to find out what they want improved.