“How does it make you feel?” is a question I commonly ask when I meet hosts on Airbnb, drivers on Lyft or Taskrunners onTaskrabbit to try to understand the role this rising breed of companies in the collaborative economy play in people’s lives. What I have noticed is that I often don’t get a simple answer but they tell me a story, their story of why they are doing what they are doing. And embedded in these tales is a cult-like sentiment that could rival Apple devotees, Harley Davidson fanatics or Star Trek groupies.
To have achieved this level of devotion from their users is incredible given that many of these start-ups are less than five years old, have spent very little on traditional advertising and have relatively small marketing teams compared to established brands.
So what can we learn from the collaborative economy in terms of opportunities to engage people and build loyalty in new ways?
PEER TRUST VS. INSTITUTIONAL TRUST:
In the 20th century, brands were built on ‘institutional trust’; the company created a product or a service and controlled the way it was distributed. Marketing and communications were built in a similar fashion centrally creating all the information and images that would shape consumers perceptions of their brand. In other words, brands had immense power over consumers to tell them whom and what to trust, what products and services to buy. And for the most part, people felt safe trusting these recommendations.
But today, we are seeing an erosion in confidence in established hierarchies, and the rise of decentralized platforms and marketplaces built on peer trust. Technologies are making it easier by reducing the fear of interacting and directly exchanging with ‘strangers’. Our peers are not just shaping our purchasing decisions through online review platforms such as Yelp, TripAdvisor and Angie’s List but are increasingly the people we want to directly transact with, bypassing traditional institutions.
Established brands need to embrace that the role of the ‘institution’ dramatically changes in a peer trust environment. A shift from centralized controller to trusted third party facilitator is required; and this is harder than it sounds because it means companies have to accept that they have to let go and get out of the way around what providers and customers choose to do.
It’s a complicated new world because customers may not want the company involved 99% of the time if the exchange with their peer is a positive one, but when something does go wrong, the traditional company is what they seek. For example, if my driver on Uber is rude, I will contact the company, not the driver to complain and get a refund.
We are currently in a trust dance between people increasingly trusting direct connections with other people but falling back on the role of the established institution when peer trust fails. Brands have to figure out how to play in both worlds.
SOCIAL STANDING VS. ELITE STATUS
As collaborative marketplaces mature and competition increases, companies are forced to focus on their own loyalty solutions to attract, grow and ultimately retain relationships.
In any given category, the customer now has several options. Need a ride? Choose between Uber, Lyft and Sidecar. Want to rent a cool place to stay? Choose among Airbnb, One Fine Stay, Wimdu, HouseTrip and many others. Want to find a nice home for your doggy to stay at? DogVacay, Rover and MyDogBuddy will be competing that you choose them.
It is early days but what we are starting to see is that traditional reward programs (points, discounts, offers) are sometimes offered but they are becoming secondary to mechanisms that give people ‘reputation capital’; a concept I define as ‘the sum worth of what a community thinks of you.’
It is a new kind of ‘elite status,’ where people’s social standing in the marketplace is transparent to others and increasingly valuable. As marketplaces grow, competition between providers and even customers grows. Why should I rent a place from Joe when Susie place looks just as lovely and she has a better reputation?
Take Airbnb, the company currently does not offer a traditional rewards program for hosts and guests that is similar to hotel loyalty schemes. Instead they are focusing on building a cult-like loyalty between hosts and the company, and more importantly between hosts. (Note: the current focus is on hosts not on guests because hosts are the suppliers who control the quality of the brand’s experience.)
Here are just a handful of things Airbnb is doing:
- Celebrate ‘SuperHosts’: Just like power sellers on eBay, hosts that continually provide a great experience for guests are rewarded with stellar reviews and subsequently become part of the ‘Superhost’ program
- Social Perks: People who reach Superhost status then receive perks including: badge they can put on their listings, priority support, travel coupons and are involved in previewing upcoming product releases. Their places are also profiled in visible places such as ‘Airbnb Picks’, appear high in the listings and are featured in the company’s quarterly magazine, Pineapple, featuring “stories as told by the unexpected characters of our community”
- Local Groups: Airbnb has created a platform for hosts to form local groups that get together and learn from each other.
- Mega Events: For example, Airbnb Open, was a three-day conference that brought together 1,500 hosts from more than 40 countries. Hosts swapped stories and ‘secrets’ of hosting but the real goal was to make them feel an infectious connection to global home-sharing movement.
Collaborative brands are moving away from “of the moment” transactional loyalty (I make a purchase and am rewarded for that purchase) towards social status loyalty that enables them to build meaningful relationships at scale. Or as Jonathan Mildenhall, Airbnb’s CMO puts it “‘Community-Driven Superbrands’.
PARTICIPATION VS. TRANSACTIONS
Traditional brands are trying to enter the collaborative economy through investments, acquisitions and new offerings. But the common way to enter is to partner with start-ups in the space to achieve the following:
- Meet a new behaviour: Brands are recognizing that they need to evolve to meet a range of behaviours beyond buying such as sharing, renting, collaborating, and swapping.
- Customers can now rent tools and trucks on Home Depot, rather than buy equipment that may only be used occasionally
- Argos has created a toy swapping platform to make it easy for customers to get rid of their unwanted toys (and get a voucher to buy new ones)
- Patagonia has partnered with eBay for people to sell their unwanted clothing
- Virgin Airlines partnered with Taxi.to to enable travelers to share taxis after their flights
- Extending value: Brands can extend the role they play in their customer’s lives by extending the way they think about delivering value. For example:
- The Cosmopolitan Hotel in Las Vegas has partnered with Rent The Runway to make it easy for their guests to rent a luxury gown for their night out extending their travel experience promise.
- BMW cars has partnered with Just Park to enable drivers to find and book a parking spot from their steering wheel offering value beyond the car into wider ecosystem of mobility needs.
- Unlock ‘idling capacity’ of assets: Brands are realizing they have underutilized physical and intellectual assets that they can create value from in new ways:
- GE has partnered with Quirky to provide an open library of patents for any inventor to use as the basis for their products.
- W Hotels partnered with DeskNear.Me and Marriott has partnered with LiquidSpace to create ‘Workspaces On Demand’. It’s also a smart way to engage a different audience e.g. 56% of people using Workspaces On Demand’ are Gen Y.
- Surprise Customers: Brands are offering surprising experiences to customers that you would not quite expect from them but that are still credible:
- Santander bank refers customers who are not a good fit for them to Funding Circle, a peer-to-peer lending provider. Yes, a bank is passing on customers!
- Walgreens partnered with the errands marketplace Taskrabbit to deliver cold and flu medicine to the doorstep of people sick at home.
- Pepsi partnered with Taskrabbit to give customers a free hour of chores
Most collaborative start-ups are not yet household names but they offer interesting ways for established brands to get beyond transactional relationships with customers, and create new forms of participation and ultimately deeper engagement.
We are just at the beginning of the beginning in seeing how brands in the collaborative economy will reshape company relationships and loyalty with customers. I believe the likes of Airbnb, Etsy and Lyft will not only challenge traditional marketing techniques but become a new breed of community-driven brands that redefine how we think about trust and shared-value.
This article has been reposted from collaborativeconsumption.com