To deal with the changes in how customers interact with companies, a new model for customer relationships is needed. The Lifetime Opportunity Value Equation (LOVE model) gives product managers a relevant and actionable framework for generating valuable interaction with consumers.
The critical role of the product manager is in the process of changing significantly, and both companies and product managers need to adapt. While product management is among the most critical roles in any company, it’s a role whose importance is under-heralded in most organizations. The extent and nature of the changes to the role mean that those that fail to re-invent themselves—or don’t try—are likely to find themselves displaced.
Two major forces are driving the need for change in product management. First, the nature of the competitive landscape is changing with the emergence over the past 15 years of low-cost, off-shore manufacturing that quickly clones successful products. Merely manufacturing a quality product that people want has become a profit-challenged commodity business. Earning the types of profits investors expect from American technology firms now requires rapid and continuous innovation and a move toward difficult-to-copy solutions rather than products. Apple’s success with the iPod and iTunes represents near perfect execution. Often a solution may span companies or involve active partnering with users. Crowdsourcing and mash-ups are examples.
The key to success is being open to new forms of value. Some of the new forms of value may be unfamiliar: consumer products companies offering their “products” as components to third-parties building unique solutions or even entirely new products. Turning one’s customers loose is an excellent way to drive lots of innovation. iRobot allowed its Roomba robot vacuum cleaner to become an open platform resulting in a nearly limitless variety of upgrades and modifications available from third-parties. Many of the resulting devices are not even vacuums.
With so many more inputs, the role of the product manager is becoming less about coming up with great ideas and more about enabling, gathering, and coordinating inputs as a sort of “traffic manager” or hub.
The second force is the manner in which companies interact with their customers. Gone are the days when companies could broadcast a controlled message to consumers. Two-way media such as blogs, user reviews, and social media mean consumers can talk back—and to each other—without the company having any say in the matter. Don’t fool yourself into thinking focus groups or even direct customer meetings create a truly bi-directional relationship of the type that is needed going forward. These transactional type activities are controlled and shaped by the company. Non-transactional interactions occur between peers. The need for interactions rather than transactions changes the methods employed by the product manager (the “how”) every bit as much as the need to accelerate innovation and introduce solutions (the “what”).
To date, nearly all attention has focused on the “what,” although the “how” is no less a challenge. Since customer interaction is growing in importance, a big part of the “how” is the manner in which your company interacts with consumers. This is a huge and visible change for the marketing function. To non-product managers, the change is less visible for product management, but no less important for success.
Technology makes it easier than ever for product managers to listen in or interact directly with customers, adding new tools to the product manager’s kit such as crowdsourcing and co-creation. Technology is an enabler, but doesn’t tell the product manager when and how to engage customers, or to understand how customers vary in their relationship needs.
To deal with the changes in how customers interact with companies, a new model for customer relationships is needed. Product management (and marketing) needs to lead the way in understanding how to engage and leverage customer relationships in the age of two-way media.
Most organizations—probably yours, too—define customer relationships in terms of a linear path that allows deterministic modeling, such as the buying funnel process: awareness, consideration, and purchase. The buying funnel is predicated on your company controlling the message, but this no longer works in an environment dominated by two-way and unstructured communications.
The key in the new environment is interacting with consumers rather than transacting with them. Product managers and marketers currently lack a model for understanding how to interact with consumers as the company-customer relationship evolves through different stages. (Newsflash: not all consumers are the same.) This represents a huge change for marketing managers as they must stop trying to bribe and manipulate people to get consumers to do what they want. This is transactional behavior that doesn’t encourage your company—or the consumer—to seek new forms of value.
Product managers have a lot at stake as well. More than marketers (perhaps), product managers understand that customer relationships evolve. However, most lack any sort of model to understand this evolution and use it to their benefit. Even fewer use—or even recognize the enormous power of—a model that is shared across all parts of your company.
The Lifetime Opportunity Value Equation (LOVE model) departs from the buying funnel by viewing consumer relationships as an evolving set of bi-directional interactions. These relationships grow from an introductory stage where neither party knows much about the other all the way to co-creation. In a co-creative relationship, you and your customers share a common vision and align interests. The benefits of co-creation are huge, and reach into every corner of your company and are reflected in both top line revenue and bottom line costs. Deeply engaged customers buy from your company not merely because they like the product or service, but because they genuinely want your business to be successful.
The LOVE model can be applied to any online relationship, not just to customer acquisition and purchase. Likewise, the benefits of the LOVE model extend far beyond social media and marketing campaigns, making it of particular value to product managers seeking to drive change throughout their organizations. The LOVE model drives long-term value in areas as diverse as customer support, product development, and thought leadership.
Bruce La Fetra is a Business Strategist for Rubicon Consulting, Inc.
With insight gained from more than 20 years experience in product
management, marketing, and strategy consulting, he guides clients in
market definition and visioning work to define their mission and growth
He writes and speaks on business models, consumer experience, and pricing & licensing. Prior to consulting, Bruce held product management, business development, and product & service marketing roles for leading software, hardware, and financial services companies. Contact Bruce with thoughts on the LOVE model at firstname.lastname@example.org