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Can a Contact Us email link actually do more harm than good? Perhaps yes, if you don’t answer it. You worked hard to bring customers to you. The branding, the advertising, building the website, getting the right domain name, finding your niche, and putting your product in front of customers. Don’t blow your chance to have a conversation with them.

Clayton Christensen has been inspirational to me. I read his books shortly after I posted my thoughts on the value chain concept and was thrilled to hear him do a better job of articulating similar ideas. Considering that I am a Mac user and a huge fan of the iPod I find his interview in Business Week discussing Apple’s future prospects very interesting. I am going to disagree with him on a few points, not because I am right and he is wrong, but because I find it interesting to examine Apple’s current success defying conventional wisdom.

Christensen bases his opinion that Apple will falter with its continued proprietary approach on the principle of industry standards. It is inevitable in his view that there is an inexorable push toward “the standardization of interfaces, which lets companies specialize on pieces of the overall system, and the product becomes modular. At that point, the competitive advantage of the early leader dissipates, and the ability to make money migrates to whoever controls the performance-defining subsystem.” The consumer electronics industry indeed follows this model of standardization and modularization driven in large part by the economics of competition and consumer desire for cheaper products. But the theory ignores an important characteristic, usability. Buyers across many disparate categories have shown a willingness to pay more for a better user experience. When the goal of providing that experience diverges from the focus on cost-cutting, an opportunity emerges for a company like Apple to provide a product that costs more and is perceived to be better. I consider the Mac and the iPod to exemplify this “better for more” category.

Any discussion about Apple inevitably leads to a comparison with Dell. And indeed Christensen goes on to state the Apple cannot innovate its way to greater market share for the Mac because “a good Dell PC can be had for $500, and it has performance that’s well beyond what most of us need.” I’d argue that Dell achieved impressive results driving cost out of the system from innovative process improvement, but now lower prices and increased performance no longer qualify as innovation. Look at what Guy Kawasaki recently said about innovating by jumping to the next curve. “Too many companies duke it out on the same curve. If they were daisy wheel printer companies, they think innovation means adding Helvetica in 24 points. Instead, they should invent laser printing. True innovation happens when a company jumps to the next curve–or better still, invents the next curve.” Could it be the case that now that computers are both powerful and cheap enough that they will be differentiated by usability?

Since we have such a love/hate relationship with computers, I’ll use the iPod to illustrate my idea. In the market for portable music players there are plenty of devices that cost less and/or have more capacity or features than the iPod. But any of them would be lucky to achieve 2% market share compared to iPod’s 75%. People are clearly paying for a better user experience. Even factoring in that some of that market share is due to marketing and trendiness. But I know people that have another player and switched to an iPod.

And what’s the user experience they are switching to? It’s that very lock-in that by all accounts should be driving them away from the iPod to the more open competitors. Look at it from the point of view of a less technical user. Where is my music? It’s in iTunes. Where is the music store? It’s in iTunes. How do I rip music from my CDs? In iTunes. Where does my iPod appear on my computer when I connect it? Again, in iTunes.

Any Apple competitor could offer this experience, but they don’t. And they won’t because they rely on the modular approach of hardware vendors supplying the hardware, software vendors supplying the software, and Microsoft providing the standards. This makes it all interoperable, but prevents building and offering a unified user experience. This is the market model Christensen predicts will succeed based on commoditization pressures at each layer in the value chain. A user can swap out one player for a cheaper or more feature-rich model and continue to use the same software and online music stores. Or switch software or stores. It’s all interoperable.

The way to add value and thrive in such a competitive market is to integrate value from another layer. (This is my view and not necessarily Christensen’s.) Thus when the iTunes software tightly integrates with the iTunes Music Store it sacrifices market interoperability but adds usability value. Same with the iPod and iTunes. We are witnessing a market where the customer is valuing the improvements in user experience over the economic value of openness and interoperability.

But the economic advantages are not absent in the iPod and the Mac. The component layers are still commoditizing. Hard drives, processors, displays, and other components are industry standard in the Apple product line. Apple thus benefits from the same component pricing economics as its hardware competitors. It is only the operating system layer that is proprietary and tied to the hardware. And again, from the user perspective that is the layer of interaction. You only buy the product one time, but you use it continuously. Is it hard to believe then that users would make a value judgement and choose to pay more for a better user experience?

None of this is to say that Apple can continue to stay ahead of the market with an approach that defies the conventional economic forces of the industry. But I think the economic argument is overlooking the impact usability has on value.

Considering that location is often the key to success for retailers, some stores have taken to unconventional means to increase their visibility. It’s hard to see a building from above unless in an airplane of a nearby taller building. So stores that used their roofs to display their logos could stand out for the novelty of the act. Of course with the constraint that outside of cities with many tall buildings or locations near airports it would likely never be seen. Until now. In another example of how search is changing the game for retailers, satellite images now offer the chance to turn rooftops into billboard advertising for only the cost of the paint.

Here’s an opportunity to stand out. Local search for products and services is going to be huge. Show the early adopters that you get it.

When I began this blog one of the areas on which I wanted to focus was job search. Specifically I wanted to blog my own job search. I had developed a methodology for targeting my resume and my job-related communications to the specific company and job I was seeking and felt it would be good insight to share. Blogging my job search was at the advice of Heather Hamilton, a Microsoft recruiter and blogger. At about the time I felt comfortable having enough material in place to go public with the blog I got my current job at ChannelAdvisor. I still feel I have a lot to share from my job seeking experiences, but an ongoing job search is not a part of my focus here at this time. I still read Heather’s blog and particularly enjoyed her latest post. Heather details some of the thinking from the staffing side on how candidate resumes can tell a story.

The last interviews I had before this job were, ironically, with Microsoft. The interesting thing about the all-day series of interviews I had in Redmond was how much fun I had. In fact it was the most fun I have ever had interviewing. The critical difference was that I approached it entirely as a conversation. Instead of answering open-ended questions with the standard interview responses I told stories. Over the years of thinking about this I have found anecdotes from each job I have had that demonstrate critical thinking, leadership, overcoming objections, working with teams, working independently, recovering from setbacks, and all the other standard “describe a time when you had to…” questions. I have turned those experiences into stories that not only address what the interviewer asked but also reveal who I really am. If you ask any of the six interviewers I met that day if they know anyone who is passionate about retail they will likely remember Scott Magoon leaning forward in his chair telling a story about his retail experiences and what he has learned and accomplished.

We remember conversations. We connect with mental images. All the standard interview advice and resume training focuses on parsing words and phrases to convey the right meaning. I think there is something seriously missing if we are not treating interviews as conversations and using stories to convey lasting impressions beyond the appropriate action verb and quantifiable result.

The retail business model has long been based on a simple customer acquisition and retention strategy.

1. Get potential customers to your store.
2. Convince them to pay for your product or service.
3. Bring them to back to purchase again.

Acquire. Convert. Retain.

This works for brick and mortar and online commerce. But retailing is changing from a transactional model to one based on relationships. Your best customers are no longer simply those which spend the most money. Now they are those who reliably and predictably purchase, enabling you to forecast accurately. They are those who evangelize your products and influence others to become your customers. They are those who engage in conversations with you offering useful feedback and direction on where the market is going.

So I am introducing a new focus on what I call Retail Conversations. I will highlight how smart retailers are connecting with their customers in new and innovative ways. How they are using blogs and podcasts. How they create value through free information leading to more informed and loyal customers. How they respond to customer feedback and adapt to the market.

The Internet and related technologies have created a world of opportunity to sell to customers as never before, but even more importantly to engage in conversations with those customers. Retail Conversations will be my look into how and why that interaction works.

Microsoft is preparing to challenge Google Base with its own online listing service called Freemont. The service is currently in internal beta testing but Charlene Li at Forrester concludes that it will be better than Google Base.

Google Base is an unstructured online database of user-supplied content. Its stated purpose is to make more information searchable (in line with Google’s primary mission), but it is causing waves in the ecommerce world. Our CEO Scot Wingo has blogged about Google Base several times, raising its profile among sellers who currently utilize eBay as a sales channel. ChannelAdvisor has even announced official support for sending inventory feeds to Google Base from our Merchant platform.

Google Base does offer some great advantages for sellers – it’s free and integrates into Froogle searches. The parlor game is now to speculate on how far Google will take Base into competing as a full online marketplace. I have said that I think it’s more about bringing more information into the realm of Google searches and Charlene and Danny Sullivan at Search Engine Watch seem to agree. That said, the implications for online marketplaces and especially classifieds are enormous. Few things validate an online service’s approach than a direct confrontation by Microsoft. And Microsoft is about to face off against Google Base with its Freemont service.

What’s exciting to me about the service, now in Microsoft internal beta, and what Charlene highlights, is its ability to limit viewing of posted material to a specified list of contacts. Microsoft points to using a contact list in MSN Messenger as an example, but there is a far more interesting aspect for retailers. When used as a marketplace this ability could be used to target promotions to certain client lists. Right now many retailers use mailings to target a portion of their customer base with exclusive offers and private shopping events. Freemont will offer the ability to maintain an exclusive online listing area for select customers.

This service is still in beta so I don’t know how it will ultimately work or if as Charlene Li suggests it will be better than Google Base. But the competition in this market space is great news for both buyers and sellers.

[Update: Scott Wingo has posted a few more links to articles on Freemont and Google Base.]

Companies as diverse as Wal-Mart, Microsoft, the New York Times, and NBC are concerned about the growing threat from Google. If you are a retailer you need to be aware of what is happening in online search and make it work for you before it works against you. Here’s a quick overview of what’s happening and why retailers need to leverage it to sell more online.

Microsoft Challenges Google

First of all, what does Google really do? Google monetizes your attention. Google uses its clever technology to give you something compelling (relevant search results) and earns revenue by advertising during to process. Microsoft is getting into that game in a big way with two important initiatives. First they created an advertising platform to challenge Google’s stranglehold on targeted ads on a search platform. (Microsoft announced adCenter at ChannelAdvisor’s recent Summit trade event.) And now they are announcing Live.com, an online platform based in part on their Office productivity suite. What the Office Live component will do is offer features based on Microsoft Office but as an advertising-supported online service. By turning a product into a platform users can turn general productivity applications into customized business solutions. And Microsoft can then use their advertising engine to monetize your attention by serving you targeted advertising.

Google Targets Your Phone

Meanwhile Google and Yahoo are pushing fast into the wireless phone market and will be delivering more features wirelessly. I am absolutely convinced of the importance of local search and that EBay bought Skype to create a searchable marketplace for local services. Google Maps has an open API on which developers can build applications showing data from other sources on a map. Now you can not only find goods and services online, you can find where they are on a map. And soon you will be able to find them wherever you are with your mobile phone. The next step will be for goods and services to find you.

If you are marketing to consumers this is great. But if you are a retailer you need to be aware of the future in which consumers are empowered to know where the best deals are at all times. How would your business be affected if a customer in your store could glace at her phone and see that a better deal is available at your competitor two blocks away? Could you differentiate yourself enough to overcome that threat?

Yahoo Talks to Your TiVo

Yahoo has announced new functionality for its online calendar, part of the popular My Yahoo portal, that will allow TiVo subscribers to schedule upcoming recordings from its online TV listings. Why is this important? Because by extending functionality Yahoo is gaining more of your attention.

The Retail Angle

Now if you are in the retail business all this is important to you for several reasons whether you sell online or not. First it blows the advertising business wide open. You can now reach potential customers at more times, in more places, and when they are most interested. But more importantly it creates an attention platform that you can leverage to enhance your customer relationships. Google, Yahoo, eBay with Skype, and Microsoft are building online platforms and services to monetize your attention. They will pay for it through advertising. If you sell products then this is represents new opportunities for you. Use the opportunity this new attention economy gives you to build conversations with your customers. Reach them when they are most interested and you will be an advisor. The old broadcast model makes you a distracter.

Search empowers the consumer. It discounts the benefits of location and threatens to disintermediate retailers. But by embracing search first you can highlight your differentiating factors and bring consumers to you in way not possible before. The big guys are spending billions to build the engines. You can be the fuel or you can ignore the coming changes and risk becoming roadkill.

Here’s why I think that Google’s threat to the world’s largest online marketplace is overblown, plus my opinion on eBay’s plans for Skype.

The benefits that Google Base appears to offer to online buyers and sellers is first that it’s free, and second that it is searchable via Google, whereas eBay and craigslist are not. Two great benefits to be sure. But beyond that nothing is clear and Google is predictably cryptic as to its plans for the service. As I mention below, I think this is simply an attempt by Google to make more information searchable and to make its results more locally relevant. Enhancing the ability of consumers to find things is a laudable ecommerce goal but free listings, even with a Google-sized audience, do not make a market. In addition to a list of things you can buy, eBay offers a secure online payment system, feedback ratings on buyers and sellers, extensive anti-fraud efforts, search via categories and attributes, and policing of the behavior of its members. The effectiveness and implementation of each of those is up for debate, but the bottom line is that eBay is a total marketplace offering distinct advantages for both buyers and sellers.

Google has earned respect as it enters new markets and Google Base certainly represents a new angle on participatory ecommerce. But all this discounts how consumers actually shop at retail. Most of us are browsers focused on the items we are interested and not on the technology used to present them to us. When you are in a mall do you care about the total square footage, the construction techniques used to support the glass dome over the food court, or the volume of air moved by the air conditioning system? No, you probably never thought about the physical infrastructure. If you are an eBay buyer do you care that the seller had to pay a listing fee? Not your problem. The seller will pay that fee for access to the buyers. Right now, and for the foreseeable future the buyers are on eBay. And since most eBay users are buyers and not sellers the critical mass to move to another marketplace will not be there.

Local Advertising

That said, I do see eBay and Google converging onto a new ecommerce market – local services. This is where eBay’s Skype acquisition and Google Base will become strategically relevant. Let’s start with the numbers.

According to Borrell Associates, online local advertising amounted to $2.8 billion in 2004. That’s an increase of over $600 million from 2003, but still represents only about 2% of all local advertising spending. The physical yellow pages still rule as the dominant medium for local services advertising. But it seems that consumer behavior is changing faster than advertising budgets. The Kelsey Group reports (Feb. 2004) that 25% of online buyers’ searches are for local merchants. That’s surprising to me and apparently double what analysts had predicted. So the trend is clearly that buyers are increasingly turning to online searches for local services.

Local merchants and small businesses account for the lion’s share of the $15 billion in annual yellow pages advertising spending. It has proven effective as a search vehicle for local products and services but it has the disadvantage inherent in physical media of not providing a quantifiable return on investment. Online marketing provides this benefit by tracking click-through. This is a key reason why ad spending through Google is now around $500 million a month.

This leads to a rich market in local services advertising to be tapped by a service that can deliver the quantifiable results of pay-per-click model on the web with the usage pattern of the print yellow pages. This is where I believe eBay is heading, and where I think Skype fits in.

The Skype Angle

The initial criticism I read of eBay’s purchase of Skype, beyond the seemingly astronomical price, was that connecting buyers with sellers through IP telephony was not something their users wanted. In fact sellers were pretty vocal that they did not want a way for buyers to be able to call them. They prefer to keep them at arm’s length by using only email. Fair enough, but that underestimates the Skype potential by focusing solely on eBay as it exists today. If we look at local services as a future market yet to be tapped by the proper technology, then eBay has a huge potential market for connecting (local) buyers to sellers (of local services). And if that market is now served by the yellow pages then the model for connecting those buyers and sellers is clearly voice phone calls.

So, here’s what I see happening. Say for example that you have a service need. Typically it is a one-time occurrence where you have a leaky pipe or a broken garage door. Maybe you need to book a band or order a wedding cake. In these cases you need someone local and you need to communicate with them to explain the situation. You probably pick up the yellow pages and call a few companies based on the size of their ads. In some cases you may do a web search, but you are less likely to find relevant local results and even if you do you will probably still call them on the phone. This is not like ordering a book that can be shipped from anywhere. Especially if you have something broken and you need it fixed!

EBay can step into this market by providing a local services marketplace with the ability to click to call by using Skype. All the components are there for eBay to make this happen – the market need, the financial viability, the technology, and the market leadership position to establish it. The hurdle is disintermediation, but that’s a topic for next time.

As I discuss things related directly to the field of my employment, I feel it important to publicly issue a disclaimer regarding the content on categorystrategy.com. All original content appearing under my name on this site is my own work comprising my personal experience and opinions. It is not sanctioned or endorsed by my employer or any other organization.

While the subject of Google Base is hot I thought it a good time to step back from divining what Google may be doing and look at where search as a whole is going. Right now when you search on Google you are generating much more than relevant search results. You are minting money. According to the figures in Google’s just-released results for Q3 2005, you and your fellow searchers are delivering $4 million in profit per day. You do that by generating relevant situations into which Google inserts targeted advertisements. The situations are so relevant that advertisers pay handsomely to show just a small amount of text and a web site link to you.

Here’s why. Search has become the online equivalent to the retail shelf. It is the moment of decisive customer interaction. When I type “HDTV” into a search engine I am doing so for a reason. And online retailers will line up to show me ads for HDTVs. In fact they will bid on how much they are willing to pay Google if I click on ad ad generated by that search. Why? Because based on that search I am signaling an intention. Sellers of that particular product are prepared to pay for my attention of that signal was in fact my intention to buy.

Now here’s where it gets interesting. Consumers are spending somewhere north of $100 billion online in the U.S. That’s exciting and the growth rate is fantastic and all. But it represents less than 2% of all consumer spending. Most consumer dollars are spent locally. And that will always be the case. But commerce-oriented search isn’t only about online fulfillment. I may buy that HDTV online and maybe from an online retailer that served me an ad with the results of my search. But I am more likely to buy it locally. And that’s the holy grail for retail search. Not just relevance, but local relevance. That’s what Google, Yahoo, MSN, and the rest are cooking up.

Go ahead and type “muffler” into a search engine. Ask yourself why anyone would want to search on the word muffler. The only time I would ever be interested in a muffler was if I needed one. And if I need one I probably need it immediately. And I also probably need it to be installed on my car. With the “HDTV” query I could reasonably have been simply researching. But with “muffler” I want to buy. So the right ad here is a local ad. The situation screams for an ad from the Meineke down the street, not meineke.com.

Getting back to Google Base (is that like “data base”?), if it really is a service allowing you to “Post your items on Google” then how much more local can you get? It’s the concept that made craigslist so popular. Peer-to-peer commerce started on bulletin boards and has grown into eBay. But the urge for buyers and sellers (and barterers and swappers and hagglers) to interact locally is still strong. If Google Base is real then Google is about to launch a new weapon in the battle for the local search market - all of us!

If you are a retailer there are three important steps to maintaining and improving your business. You must get consumers to your store, get them to buy your product, and get them to return as a repeat buyer. Here’s how blogging will help you accomplish two of those objectives.

A growing percentage of consumers, especially the young and the members of Generation Specs, are going online to find and research products. I personally begin nearly every purchasing decision with an online search and a scan of reviews. Many people I know are so plugged in during their day I wonder how they would even find something at a retailer without web access. And soon, smartphones, wireless networked devices, and improved local search will enable online search from anywhere. While you no doubt know the importance of having an online presence you may not realize how much blogging can add to your visibility.

Blogs are remarkably search friendly. They are frequently updated and linked to, so they tend to get higher search result placement than static web pages. They also speak to the younger generation in the more informal language they expect. If you want to be found online, and believe me you do, then a blog will help. This is not about gaming the results of search engines. It’s about creating the type of online presence that gets found and gets viewed. It’s a way to bring customers to you.

Blogs also do something very important to help you retain loyal customers. They create a sense of community. While we’ve long been in the age of the big box retailer and seen the near demise of the neighborhood store, and online community can bring back some of the sense of chatting with the knowledgeable local store owner. A great example of this is MenEssentials, an online retailer of skin care products for men. Through open and candid conversation about products the carry and even those they don’t, plus the welcome participation by market insiders and experts, the owner’s postings and the discussion forums have created measurable loyalty. New customers offer testimonials, and repeat (satisfied) buyers discuss the incremental purchases they made from suggestions they read on the site.

Community can’t be faked or forced. It has to begin with genuine desire, openness, and honesty on the part of the owner. And I believe that a blog is one of the fastest and most effective ways to communicate that you are different than other retailers. Since a blog is an addition to your regular web property it takes nothing away from what you already have and it will only be found by those who are interested in it anyway. If nothing I have said is compelling to you then a blog is probably not the right thing for you. You have to get it before you can communicate it. But if it makes sense and you can see the benefits of communicating to the connected generation, then get started. Start talking in your own voice not that of a corporation. Openly, honestly, and candidly. Be smart if you officially represent a company, but be yourself and have fun. Customers will find you and reward you for it.