Data-driven businesses are forcing a profound rethink of how and why customers engage with brands, according to Jane Huxley, managing director of online music service Pandora in Australia.
Fueled by data, these “platform businesses” use technology to provide their customers with opportunities to interact, and then create revenue streams from the data collected on the basis of that interaction. For example, Google and Facebook let people use their software for free, generating revenue streams from the data they gather based on how these customers behave online. Excellent service based on data analytics is a fundamental pillar of platform businesses.
“As a platform, part of what we do is surprise our listeners with new music based on what they have told us they love. The feeling that generates is a sense of delight and discovery that we, as human beings, feel compelled to share with our friends,” Huxley told CMO.com. “This is how we grow virally, through this sharing between friends, leveraging the magical combination of personalization and discovery. Right now we are adding about 25,000 new listeners a week, and are at well over 2 million listeners here in Australia and New Zealand just after a very short period of time.”
Although traditional B2C companies are still struggling to understand the underlying logic of the platform-as-a-business model, emerging companies have discovered it almost by mistake, she added.
Take, for example, edgy Australian clothing brand Black Milk. The retailer was founded when managing director James Lillis sold a pair of leggings to a friend, and then blogged about the experience in November 2008.
For about 12 months, Lillis tried selling his homemade lycra clothing at weekend markets before he realized he could use his already-popular blog to reach out to people who were now actively interested in the brand.
“The Black Milk community had been gathering around the blog and the Web site, and it had vastly more reach than the people who ‘happened’ to be walking past at the markets,” said Black Milk CMO Cameron Parker.
Over the next couple of years, Lillis grew the brand organically, while repeatedly failing to win his creative lycra leggings any shelf space with retailers.
“We had no money for advertising, and all the clothing labels were laughing at us for trying to sell leggings online,” Parker told CMO.com. “But James was already using his blog to get feedback about what people wanted, and creating the community.”
This all-important feedback loop, combined with limited runs of clothing lines and an excellent grasp of storytelling, has underpinned Black Milk’s growth from local heroes to an international success. From the early days, Black Milk customers began posting selfies of their new purchases online, a trend that has only accelerated. Communities of Black Milk customers, known as “sharkies,” are now all over the world, as well as SharkieCon events that create an opportunity for Black Milk customers to come together.
“The term ‘sharkie’ came from this time when our Web site crashed just after we released a new range,” Parker explained. “We put up this story about how we felt like we were Lady Gaga wearing meat-colored tights jumping into shark-infested water, and there was a feeding frenzy–and, of course, the sharks were our customers.”
The online communities surrounding Black Milk ensure that the customer relationship is maintained long after the initial purchase. In order to achieve this level of engagement, the brand operates more like a traditional publisher, creating a community of shared interests around its product, rather than simply seeing them as consumers.
Indeed, the connection between customer and community is a fundamental pillar of the platform business model, and can be seen in the rating systems used by companies including Ebay and Freelancer.com. Platform businesses also have a very high level of insight into their customers, and use this insight to improve their services in an iterative fashion.
“Powering Pandora is an enormous bank of data, and it’s that data itself we use in multiple ways to perform platform-type services,” Huxley explained. “We use data to select the music, but we also know a huge amount about our customers because we’re a digital platform. We’re able to target, measure, and tweak to create an incredibly powerful way for brands want to connect directly with people.”
Both Parker and Huxley pointed out that the capacity to use in-depth customer data to deliver highly targeted products or services creates significant brand loyalty and a strong sense of ownership.
“The platform itself is more like an ecosystem powered by data,” Huxley said. “It helps us with our listeners, it helps us with our musicians, and it helps us with our commercial model.”
Following the data trail means providing customers with what they want based on existing data about their preferences. As a result, the role of the CMO has less to do with creating attractive campaigns, and more to do with creating products and services that, in Huxley’s words, “surprise and delight.”