Monday, June 30, 2014

It's About Trust, Stupid Facebook

In the 1992 presidential election, a catchphrase emerged out of the Clinton campaign: "It's the economy, stupid." It was a reminder of the issue voters most cared about and the topic that would win the election. This rallying cry helped Bill Clinton defeat George H. W. Bush.

If I were advising Facebook (which, I guess, I am with this blog post), I'd hang this in every office in Menlo Park and Facebook's other outposts:  "It's About Trust, Stupid." It is a reminder of the issue consumers most care about (eventually) and the topic that will keep Facebook on top.

Facebook is in a very dangerous situation: It is wildly successful. If only all of us could have such problems, huh? The problem with success is that it tends to make an organization lazy and overconfident. Kodak was wildly successful. Myspace was wildly successful. The Roman Empire was wildly successful. When you are riding high, you begin to believe you are invincible, and that it is the moment you are most vincible.

Facebook has good cause to be confident, I suppose. After every change of its news feed, a million voices scream how they are going to abandon the platform, but few do (and the ones that do almost always come crawling back.)  Six months ago, the buzz was so loud that "kids were leaving Facebook" that every major news outlet trumpeted the exodus with headlines, yet a Forrester study found that 80% of teens are more active on Facebook than any other social network. Facebook has taken more body blows than Rocky, but it always seems to get the last punch.

Facebook appears to have little reason for concern, but neither did Kodak, Myspace or the Roman Empire--until it was too late. The thing that Facebook's leaders do not seem to realize is that if (or when) a tipping point occurs and users start to flee, the company will be as powerless to stop it as Myspace and Friendster was.

I am not suggesting an exodus is imminent, but Facebook now has everything to lose and--let's face it--very little to gain. It is already one of the 25 largest US corporations based on market cap; there aren't too many rungs above them, but there is a bottomless pit beneath Facebook. And this is a company with a single, undiversified revenue model--it is completely and totally reliant on advertising. (On this blog, I've often criticized the company for failing to diversify, especially during an age of growth in the collaborative economy. The fact Facebook remains completely addicted to old-school advertising while social business flourishes around Facebook is an embarrassment and a huge risk, in my opinion. But I digress.)

The company's lack of diversification means if (or when) people feel they can socially engage on a safer, better, more trustworthy platform, the companies' entire business model may unravel rapidly. We often forget how rapidly confident, successful companies become the opposite. Kodak was trading within 20% of its all-time high in July 1998; a little over two years later, Kodak has lost more than 50% of its value. In March 2006, Borders was trading near its record high price; two years later it was down 75%.

When the tipping point happens, no one sees it coming (or else the stock price would be lower) and everyone is surprised at how fast it happens. Facebook needs to be less confident. The company needs to be reminded "It's About Trust, Stupid."

The company may own consumers' time and social sharing, but it is on shaky ground when it comes to trust. A year ago, a study suggested consumers trust Facebook less than the NSA and the current American Customer Satisfaction Index reveals consumers are less satisfied with Facebook than virtually any other organization.

There is good reason for consumers to have little faith in Facebook. The company has shot itself in the foot several times, and the media is not always kind or fair. From Facebook settling with the FTC for deceiving consumers to Facebook monitoring your browsing behavior to target ads to social gaming scams run on the platform to the the dubious practice of sponsored stories (which turned consumer posts into brand advertising without specific permission), this is not a company with a good track record (or any track record) in earning consumer trust.

(When the company launched Sponsored Stories, I told my Facebook rep that we would participate only if we could first secure permission from each participant. My rep questioned why we would want that and I responded EVERY advertiser should want that; a couple years later, Facebook had advertiser fleeing from the program and settled a class action lawsuit over the practice. But I digress, again.)

The latest trust issue to hit Facebook was all over the media (and Facebook) this weekend. The company allowed researchers to manipulate users' news feeds to evoke positive or negative emotion, proving the obvious--we feel happier when we see positive things and sadder when we see negative things. (Shocking! Positively shocking!) Of course, some Facebook users have reacted negatively to being treated like lab rats and having their communications manipulated. (Shocking! Positively shocking!)

It has been supremely disappointing to see some marketing "experts" defend Facebook by claiming this is no different than the sort of positioning brands have always done. They fail to recognize the humongous difference between a brand manipulating its own communications to evoke a desired reaction and Facebook manipulating your peer-to-peer communications to do the same. That is the difference between Old Spice changing campaigns to increase purchase intent in consumers and Gmail hiding messages from friends to provoke a desired response in users. It is not hard to understand why Facebook is facing the backlash over the research study, but it is unfathomable why Facebook leaders ever thought that publishing the study (much less conducting it) was a good idea.

Facebook has defended the study, pointing out it has the right to do these things based on the service's terms and conditions. To me, this reeks of the South Park parody where Apple claims the right to turn customers into human centipedes because it buried this permission into the 100-page agreement no one reads and everyone accepts automatically. The fact Facebook believes it can rely on legalese instead of consumer trust is further evidence of a serious problem for the social network. It's About Trust, Stupid.

I don't have a crystal ball, and I certainly recognize that Facebook seems invulnerable to consumers' lack of trust and satisfaction. But rather than strengthen the company's resolve and confidence, the consumer reaction to this study should really be a warning sign to those at Facebook.

No company can operate without trust and satisfaction forever, and if the end comes, it will not be something most see coming--least of all the folks in Menlo Park.

Sunday, June 1, 2014

United Breaks Another Guitar and the Social Media Hype Cycle Comes Full Circle

It was one of the first stories any of us heard about the power of social media and how it was changing brands. In Spring 2008, Dave Carroll got off his United Airlines flight and found his Taylor guitar damaged. He spent nine months trying to get the airline to make it right, and in frustration he wrote a catchy tune and produced a funny YouTube video recounting his story.

The rest is history. Or is it?

Is "United Breaks Guitars" a lesson in how consumers are wresting control from brands, or just an entertaining tale?  Has Dave Carroll's saga been repeated so often because it is a powerful omen of how brands must evolve or because that story proved to be a successful sales device, raising fears and encouraging the purchase of social media services?

I have been asking these questions for years, but I think I finally got my answer Friday night at a terrific Ellis Paul concert where he described how United broke his beloved Taylor guitar and is refusing to pay for repairs. Déjà vu! We have come full circle, from one identical event to another. This furnishes us an opportunity to reexamine the "United Breaks Guitars" tale and what it really means to United Airlines and your brand.

The United Breaks Guitars Fable

Before we get to Paul's recent experience, let's revisit why Carroll's 2009 YouTube video became such a legendary social media fable. You already know the story, I'm sure; if not, search "United Breaks Guitars" for the 1.8 million(!) articles and blog posts on the topic. Each recaps how United refused to do right by Carroll until faced with an avalanche of bad PR in both social and mainstream media. It was only then that the airline was embarrassed into offering Carroll compensation.

Had the story ended there, the moral would have been concise and accurate: One individual, given enough talent and creativity (plus, let's face it, a great deal of luck) can cause so much pain that a brand must take action.

But that is not where the tale stopped. To professionals in the nascent field of social media (including yours truly), Dave Carroll was not just a skilled and creative guy whose unique talents and situation permitted a special way to elevate his gripe. He became, instead, a powerful everyman, effortlessly wielding free social media tools in the same way every consumer can.

This single consumer's actions were inflated into an apocryphal lesson: "United suffered grievous brand damage thanks to the new power of Word of Mouth (WOM), and your brand will face the same fate unless you change (and buy our listening/strategy/consulting services)!"

Did "United Breaks Guitars" Break United?

For years, I have sought evidence "United Breaks Guitars" represented something more than one guy's creative solution to a customer service problem. Yes, United eventually acted to make the situation go away, but was the company really harmed and transformed due to social media WOM? If so, there is little proof.

For example, the Wikipedia page for "United Breaks Guitars" suggests that United's stock dropped in the four days following the video's release. Of course, it is ridiculous to correlate a few days' stock variation to a single cause, and if you instead evaluate United's stock over a longer period, you find that in the six months following the release of Carroll's video, United's stock outperformed competitors' by more than 100%.

Another claim repeated time and again is that people who saw this video lost trust in United and chose competitors' flights. That is the standard WOM assertion following any and every social PR "crisis," but is it true? It turns out it is very easy to get people to watch funny videos or retweet brand-shaming tweets, but it is much more difficult to change buying behaviors. In presentations over the course of years, I have stood in front of thousands of people and asked a simple question:
As a result of seeing the "United Breaks Guitar" video (and not because of your own personal experiences), have you ever opted for a more expensive or less convenient itinerary to avoid flying United? 
Not one person has yet fessed up to altering their purchase behaviors as a result of seeing the video. You're not surprised, are you? After all, you saw the video and did not change your airline purchasing habits, either. In the end, we all buy airfare the same way, choosing whichever carrier offers a route from Point A to Point B that is cheapest, easiest and provides the right loyalty miles. If we hate and avoid United, it is because of our own experiences and not because of a YouTube video.

There is no sign that "United Breaks Guitars" impacted consumer behaviors or hurt the airline's business, but did that video affect changes within the company? That is the claim oft repeated: United learned its lesson and transformed itself! As conveyed in the book "Empowered" by Josh Bernoff and Ted Schadler, "United has changed its policies. Baggage claim agents now have a little more discretion with customers whose special situations warrant the company looking into the claim more closely; United uses Dave Carroll's video in it's training."

By repeating the story of how United had learned and transformed, were people like Josh, Ted and I (and many others) redefining the way companies must operate in the social era? Or were we merely cogs in the United Airlines PR machine, helping to turn an embarrassing brand situation into a positive corporate message? Ellis Paul's recent United experience makes it clear which is the truth.

United Breaks Guitars, Part II

Ellis Paul is one of my favorite music artists. I regularly listen to his folk-pop music while working and commuting. Paul is a terrific storyteller, an amazing songwriter, and he performs with a passion and wild abandon that I find breathtaking. His songs, such as Maria's Beautiful Mess, have appeared in more than 50 compilations and movie soundtracks such as "Me, Myself, and Irene" and "Shallow Hal."

Last month, Ellis was flying to a show in Portland. He got off his United flight and found that his expensive and beloved Taylor guitar, nicknamed Guinness, had been cracked in transit. Paul did what any of us would do in the same situation; he posted on Facebook, filed a claim and wrote the president of United. In response, Paul received a call from someone in charge of baggage handling in Portland, but all he offered was an apology. United will not pay for the repair, which Paul estimates will run around $1,500.

This is not a mere possession to Paul. He didn't find Guinness; the guitar found him. Paul borrowed it while performing at the legendary El Reno Vintage Guitar Shop, and you can see his first performance with the magic guitar on YouTube. As he tells the story, he had no choice whether to buy the expensive, beautiful instrument. Even though it is now damaged, Ellis continues to perform with Guinness, duct tape covering the crack caused by United's baggage handling. That will do for a while, but it must eventually be repaired.

Where's United's Social Transformation?

Paul's 2014 situation could not be more identical to Carroll's 2008 United issues, and the airline is dealing with it in exactly the same way. If United learned a lesson, changed its policies and revised its training, there is absolutely no evidence. Given the chance to prove how it transformed, United has failed. Just as it did five years ago, the company is "handling" the situation, not resolving it.

With Ellis Paul's United Airlines disappointment, we have come full circle in the social media hype cycle--two duplicate events separated by six years--only this time we do not have to buy the hype. We may have believed that Carroll's experience transformed United, but Paul's experience demonstrates otherwise.

The most provocative question is not whether United was transformed by social media, since it clearly was not, but why not? As social media pros hype the transformative powers of WOM, one of the things they conveniently omit is that offering better service to customers costs something. In many cases, investments in better service and improved WOM will provide a return, but that opportunity is far from universal for every brand in every category.

United could immediately pay every damage claim (or offer more legroom or give every flyer a free alcoholic beverage) and generate a lot of positive sentiment in social media, but that would also increase costs and prices. It really comes down to financial calculations: By treating customers better, will positive social media attract more customers despite higher prices? By treating customers badly, does negative WOM result in lost customers despite lower prices?

United doesn't need to wonder the answer to these question; it got its answer back in 2009 when you, I and everyone else watched "United Breaks Guitars" and changed absolutely nothing about the way we purchase travel. The fact United has not changed its practices is not because it does not care but because we do not. Social media changes nothing by itself; if consumers are not willing or able to change their spending habits, then social media crises like "United Breaks Guitars" will always be more smoke than fire.

This is not to say that WOM is never powerful, but that its power is not uniform. How often have you searched for customer ratings of airlines in the past year? And how often have you sought customer ratings for hotels? Your very different answers to these questions are why hotels thrive or struggle based on WOM and airlines do not. Because consumers probe online reviews when making lodging decisions, WOM matters; one study found that if a hotel increases its rating by one point in Travelocity’s five-point rating system, the probabilities of being booked increase by 14% and price can be increased by up to 11% without affecting demand. There is the power of WOM for you!

For too long, we have used "United Breaks Guitars" as a blunt weapon to put the fear of WOM God into brands, but looking back with clarity and hindsight, we can see the real morals of this story are:

  • Social media professionals need to stop believing every story told by brands and bring greater critical thinking to our field. "United Breaks Guitars" was not a social transformation success but a PR success: Dave Carroll became an author and public speaker, and United's PR team turned a painful PR problem into a wonderful--and fictional--story of transformation and customer commitment. The fact "United Breaks Guitars" was inflated into an endlessly repeated cautionary tale for every brand says more about the social media industry than it does about WOM.
  • The way brands treat customers in the real world has far more impact on WOM than what they do in social media. United's problem was not that it failed to reply appropriately in social media but that it did not treat Dave Carroll right from the start. Once he launched that video and it began to accumulate hundreds of thousands of views, it was too late for United--no social media strategy or program could save the company at that point.
  • Listening and responding to customer needs in social media isn't transformative but business as usual. Any brand of sufficient scale will see hundreds of tweeted complaints; that is business as usual, and those tweets need a business-as-usual response, the same as you would manage the same inquiry via email or on the phone. Social media can prove transformative for companies, but only if it changes the way they operate. Merely responding to consumers on Twitter is not a transformation; it's just good, smart business.
  • There is an exception to every rule, and that exception sometimes demands special treatment. Every now and then, a single customer can rise above the noise and generate enough attention to force a company to take special action. The reasons may have less to do with WOM damaging business and more with the fact these rare situations increase customer service costs, consume time from PR executives and interfere with the company's ability to deliver its intended PR and marketing messages.

    This is no different than in the past--businesses have always treated important or influential customers differently--but today someone can gain influence through the right combination of skill, talent, creativity, luck and perseverance. YouTube, Twitter and Facebook are littered with millions of customer gripes, and not all demand the attention that Dave Carroll got. He was not a famous musician before "United Breaks Guitars," but United made him a star, and that's why he eventually got more attention from United than many others who have since attempted the same thing.

Help Make Ellis Paul One Of Those Exceptional Situations

If you are so inclined, please tweet @United and ask them to do right by @ellispaulsongs. With your help, we can get United to do right by one musician and get one guitar repaired.

I have no illusions that spurring United to action will mean anything more than an appropriate resolution to one customer situation. If they respond, it will not represent a new paradigm, nor will it mean United has become a new and better company. All it will mean is that one worthy musician got what he deserved from a large corporation.

And if you will not do it for me or Ellis Paul, then do it for United. Ellis knows Dave Carroll and is preparing his own YouTube song with the hopes it becomes "United Breaks Guitars, Round 2." Perhaps a few tweets of pain now will prevent United from a great deal more pain later. Better United hears from you on Twitter today than read about it on CNN or HuffPost a few months from now!