It’s July of 2007 in Turin, Italy. With an automotive industry crisis in the offing, the Fiat group presents a reinterpretation of a historic compact car: the new Fiat 500. In spite of the state of the global economy at the time, this smart little retro number defies the odds and hits the market with the force of a hundred Sophia Lorens.
The originally planned annual production run of 120,000 units sells out in a matter of weeks, and feverish demand for the vehicle pushes the corresponding waiting period to as many as eight months. Fast-forward to early 2008: Virtually every market has begun to founder, yet Fiat announces its plan to increase its annual production of the Fiat 500 to 190,000 units. What did the group do right? It can’t have been the price; the downtown two-door isn’t exactly a steal.
Brainstorming with the masses
“The group recognized the importance of getting potential customers involved very early on in the Fiat 500’s development,” explains Alexander Körner, CEO of the German marketing consultancy lemon5. “This had never been done before in car manufacturing. Up to that point, companies had always tried to cast a veil of secrecy over their prototypes.” Fiat, meanwhile, set up special Web sites and tapped online forums, blogs, and other sources for new ideas. For its communication and marketing purposes, the manufacturer was also quick to secure the domain fiat500.com. There, visitors have the chance to help shape the appearance and appointments of upcoming production models.
Coinnovation, crowd-sourcing, and user-generated content are the topics currently keeping marketing managers up at night. They wonder, for example, how they might leverage the wisdom of the masses in developing and advertising products. They also worry about getting caught napping on the next trend – or not knowing what people are saying about their companies and offerings, as well as where and when.
“In the age of Web 2.0 and social media, those in marketing and customer care are casting aside many lessons learned over the past 50 years,” observes Körner. “The way they communicate is changing.” Companies used to scatter their messages over a wide swathe of the market, thus launching their brands entirely in their own image.
Today, social media have given consumers much more influence in this process. “Social media have put an end to one-way communication. Now, everyone can share ideas with anyone,” explains Yasan Budak, cofounder and authorized signatory of Vico Research & Consulting.
Instant feedback for better or worse
According to Peter Gentsch, founder of the Business Intelligence Group (B.I.G.), marketing on the Web is also unprecedented in terms of its speed. “Market research used to be retrospective. It took weeks or months to identify target groups, survey focus groups, and analyze their feedback,” Gentsch recalls. Social media analysis and monitoring have drastically shortened these processes. “Based on online user response – or ‘buzz,’ if you like – you can immediately tell how an ad campaign is being received,” Budak affirms.
“Compared to the dulcet tones of conventional advertising, the melodies you hear on social networks is less harmonious, but more authentic,” Körner believes. “The comments people make are credible because they’re not selling anything – just sharing their personal experiences.” The resulting word-of-mouth marketing – a Holy Grail of sorts for product strategists – is particularly exciting to Körner, who has seen the content produced by consumers overtake companies’ own advertising efforts.
However, there are skeptics who doubt the authenticity of crowd communication. Paid comments, PR bloggers who post and tweet, and the relative indolence of a herd that, according to the market analysts at Nielsen, follows a mere 1% share of opinion leaders make neutrality seem like an illusion.
Measuring Web 2.0
The management consultants at McKinsey have been tracking the business world’s involvement in Web 2.0 for four years. In early 2011, the company presented its findings in a study titled “Web 2.0 Finds Its Payday.” Two-thirds of the global pool of 3,249 managers surveyed therein reported using online media for business purposes. Leading the way were social networks and blogs, garnering 40 and 30%, respectively.
McKinsey’s consultants gleaned one thing in particular from their findings: Companies that make use of Web 2.0 both internally and externally attain larger market shares and margins. The more intensive the use, the greater the yield.
In light of these prospects, Peter Gentsch warns against inaction, but also recommends a calm, systematic approach. For months, he has watched social networks become a top priority. He describes it as a shift from “wait and see” to actual projects, as managers who had previously dismissed the subject as teenage frivolity or self-promotion have begun, slowly but surely, to feel the pressure. Gentsch even witnessed the dismissal of a manager who was unwilling to get on board the social media train.
Web 2.0 in practice
Any company still unsure of whether it should move these new communication platforms to the top of its agenda may want to consider some examples of those who have underestimated the power of the Internet. Nestlé, for instance, came under Web 2.0 fire following a report from Greenpeace: The company stood accused of using palm oil in the production of KIT KAT chocolate bars.
According to the environmental activists, obtaining this oil involved cutting down the rainforest in Indonesia, which threatened the natural habitat of orangutans.
Dell also found itself in PR hell after the journalist, professor, and blogger Jeff Jarvis vented his frustration with the computer manufacturer’s products and service into the blogosphere. At first, Dell simply ignored its disappointed customer. After all, what effect could a lone blogger possibly have? Much more than the company imagined, as it turned out: Others who had shared Jarvis’s experiences began expressing their anger, as well.
For Dell, it would prove to be an expensive lesson. Its revenues and share price took a nosedive, and its image was tarnished. In the end, Michael Dell took control of the company’s business once more and turned its fortunes around. It now gathers ideas through social media and utilizes Web 2.0 in providing customer support. Managers at Dell have stated that these strategies have enabled them to reduce their support costs by around 20% – all while achieving a higher level of service.
For Andreas Bauer, a manager at the German robotics company KUKA, saving money with Web 2.0 is not priority one. Through Facebook, Twitter, and LinkedIn, KUKA now addresses target groups it used to be unable to reach on its Web site or with conventional advertising. Meanwhile, Bauer says that one in every three of the robot manufacturer’s 1,800 Facebook fans is a KUKA employee. The rest consist of partners, customers, students, and private individuals with an interest in technology. Bauer considers them all valuable contacts.
“We attract social network users to our homepage, www.kuka-robotics.com, by making it the place where we delve into exciting subjects,” he reveals. In the medium term, the Augsburg-based company plans to put suggestions from these forums through their paces and determine whether related developments or ad campaigns would make sense. Bauer believes that intensive online collaboration could also eliminate the need for certain workshops.
Not there yet
While analysts have yet to produce empirical evidence proving that the involvement of the masses really does lead to better products, individual cases suggest a connection. According to Alexander Körner, however, scientific proof is not of primary concern. “People see more quality in products when they’ve had the chance to help shape their development,” he explains. “They feel like their voices are being heard and taken seriously.”
Much to the chagrin of all those who work in marketing, Web 2.0 has yet to replace any of the traditional advertising media, Andreas Bauer offers in summary. “It is an important channel, however – and it will continue to be, whether we get involved or not.”