Every so often, someone will try to start a hoax that Facebook, Twitter, or some other social media service is about to become a paid subscriber service. Then someone reminds us of the business model of these seemingly free sites. It all comes down to the difference between customer and user.
Today we will discussing Rule #1:
Know who your customer is and what your product is.
Who is the customer of Facebook, Twitter, and all of those other social media companies? It’s not the proud grandparent posting pictures of their cats sitting in boxes. That’s the user of the service. The users of the site are not the customer. The customers of Facebook, Twitter, etc. are the companies who are buying advertising that Facebook’s users see. If it’s not that, then they sell other services that will be used by their users. If Facebook started charging that would reduce the number of users and dilute the value Facebook can deliver to the advertisers. Yes, that’s oversimplifying, but that’s the nugget of what we’re talking about today: the actual customer is often not the obvious consumer.
This is the case for broadcast radio and broadcast TV, at least in the US. The viewer or listener isn’t paying for the music or the TV show. The people who buy the ads are paying for it. When a TV personality causes an uproar, for example by saying cats sitting in boxes aren’t funny, then it’s the advertisers threatening to pull their ads that causes the station to take action. Of course the advertisers may be hearing from their customers, the viewers of said TV personality, that they will boycott the advertisers’ product if they continue to sponsor the TV show unless action is taken, but it’s those advertisers who are scaring the TV station.
So what about the company that makes the boxes the cats sit in? Who is their customer? Is it the person that buys the box? Is it the cat? Or maybe it’s someone else? What I’ve learned over the years is that the primary customer of a company often isn’t even the primary purchaser of that company’s goods or services.
Ok, pause. What do I mean by “primary customer” there? I mean this: The person or organization that the company is trying to satisfy with its goods or services strategy. It’s not only the person pulling their wallet ( or maybe their phone?) out to buy that cat box. It’s certainly not the cat, the cat would be happy with any of the forty Amazon boxes their person got that week.
The other party we need to consider is the investor. And yes, I’m using investor pretty broadly there as it could be someone owning shares of stock, private equity, venture capital, or something else. They bought a piece of the company and they expect to have more than a pretty stock certificate to hang on a wall. They expect something in return. Normally, what they expect is *growth”. Lou Holtz, an American football coach, said “Nothing on this earth is standing still. It’s either growing or it’s dying. No matter if it’s a tree or a human being.” I, and many others, will also add “company” to that list.
So the investor expects to buy something, in other words a product. They buy some or all of the company, and they get something in return, namely a return on their investment, abbreviated ROI. Do you think it makes sense that those investors will then have an impact on how the company operates? Of course they will! That drive for ROI can have a huge impact on what goods and services the company offers its consumers, how much the company will invest in the future, and so on.
I worked managing software delivery for a consulting firm for a number of years. We would contract with a company to build a system or do some other work for them. It’s tempting to think about that service of building software that we provided as the product, but what was really being bought? On one hand, the customer was the company buying our software build services, but it was always in response to an initiative that was sponsored by someone within that company. That sponsor had some motive behind that initiative. In the majority of cases, that person is a salaried manager, director, or whatever. They’re not likely to be a major investor in the company, so what do they get out of it? What is the product we sold to them? Sure, they’re ponying up the company’s money, but still, they want something out of it personally. The product we were providing them was basically some variation of looking good in front of their bosses so they’d get their bonus, get a raise, etc.
Why do I bring all this up and why is it rule #1? Being aware of these non-obvious products helps us understand the real motivations of the people we’re working with. Especially in that case of the corporate buyer who really is buying the “look-good” product. I encourage you to check out YouTube videos from Clayton Christensen on this topic. He used a story about milkshakes to illustrate teh point that it’s not always obvious what a customer really wants out of a purchase. He thought about “the job” of that milkshake. What did the person need to do that led them to buy that milkshake? The answers led to thinking about the market in new ways.
The takeaway? Simply that we often have multiple layers of customers. In our teams, each of our co-workers, our boss, and anyone who is using our work product is also a customer. That can seem trite, and some people definitely use it that way, but the reality is we should understand that everyone we interact with (directly or indirectly) ultimately is trying to derive value from our work.
That can get overwhelming and trying to make everyone happy usually results in no one being happy.
Particularly in consulting, our actual customer is the person who is our primary sponsor/stakeholder. They have a motivation to look good in front of their boss. That’s the main product we’re actually selling.