CUSTOMERS AS CREATORS

Customers Create Your Content,
Create Their Products and Your Products,
Create and Share Their Intellectual Property

In 1997, Bo Peabody gave me a tip I have never forgotten: Let your customers strut their stuff!

Back then, 26-year old Bo was the creator and founder of Tripod, a Web site that he designed for college kids and recent grads, like himself, who needed help learning about the basics of life after college. So, Bo created Tripod to provide “Tools for Life” for college-age kids.

Tripod attracted 1 million customers in 27 months—customers who returned to the site several times a week and brought their friends, generating millions of dollars in revenues from fees and advertising. How did a group of college kids build a multi-million-dollar business in two-plus years, netting Bo and his co-founders $58 million when they sold it to Lycos in 1998?

At launch, the Tripod site included a resumé builder. Within the first six months, responding to suggestions from his customers, Bo’s team launched an easy-to-use “Design Your Own Web Page” wizard.

All of a sudden, thousands of people, not just techies, but all kinds of folks, began to create their own Web sites. Up until 1996, only corporations, universities, and a handful of technology-savvy individuals had Web sites. Tripod’s Do-It-Yourself Web Page builder and hosting model changed the landscape of the Internet forever. Instead of sporting a few thousand well-funded corporate Web sites, the I-way suddenly sprouted tens of thousands of personal billboards.

What can you learn from Tripod’s success? Never underestimate your customers’ desire to strut their stuff. Figure out how you can enable and encourage customers to show off their ideas, their dreams, their designs, their ideas, and their accomplishments.

Flickr: Make It Easy for Customers to Share Their Creations

Flickr is a great example of an online business that is designed to support customers’ creativity and interest in strutting their stuff. Flickr was founded by Caterina Fake and her husband, Stewart Butterfield. It was launched in February, 2004 on a shoestring and within a year it had attracted 3.5 million images from 230,000 avid users, of whom many were paying $60/year to post and store their digital photos on the site. By the end of 2005, Flickr had more than two million registered users and 70 million photographs, of which 80 percent are available to the public.

Here’s Stewart’s description of how Flickr came to be:

  “Had we sat down and thought about it, we would not have built an online photo sharing site. The prevailing wisdom was that online photo sharing was a loss leader for photo finishing services, such as Ofoto (by Kodak), Snapfish, and Shutterfly. We did not set out to build an online photo sharing site at all. We started our company to build an online massively multiplayer game. The game was built to enable people to meet, share the things they had created, and form communities. By adding photos to this idea, Flickr was born. Flickr started out as a side project that grew like a 97-lb weakling into Charles Atlas. It eventually took over the whole company. We … shared it with the blogging community of which we were longtime members. Along with our incredible team of developers, we watched its popularity grow, enchanted by the tremendous creativity (of) the Flickr users, and entered into a constant feedback-loop of new feature development and user feedback on an incredible 24x7 development schedule. We microwaved ramen, eschewed paychecks, and perfected our monitor tans.”

Here's an example of Viewing, tagging, and commenting on photographers’ works on Flickr. This photograph was taken and posted by a photographer who calls himself “SpatialK.” Colleagues (two of them members of Flickr’s “Pro” paid service) have provided feedback. To the right of the comments are the tags that have been associated with this photo to date: Lisbon, Lisboa, sky, convent, etc. These tags allow anyone to search for a collection of photos featuring sky, convents, or taken in Lisbon. See Vaulted on Flickr

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American Institute of Physics: Enable Customers to Spread Their Ideas and Gain Recognition

Don’t assume that customers only want to show off online, or that only youngsters want to strut their stuff. It’s human nature for people to want to share their creations, their ideas, their accomplishments, and their brainchildren. We human beings have been strutting our stuff since before we were human. (Why do apes pound their chests?)

Take scientific and technical journals, for example. Scientific, medical, and technical journal publishing is a 200-year mature $12.5B annual global business. Who creates the content that’s published in these scholarly journals? The customers do! That’s right, the authors who submit their research for peer review, acceptance, and publication to scholarly journals are the most important customer segment for these publishers. Without this customer-created content, the journals wouldn’t exist. The authors (or the institutions that employ them) actually pay for the privilege of being published. Those author payments defer some of the costs of publication.

There are other customers as well: the institutional librarians who purchase subscriptions to the journals for their clientele, the individual researchers who follow the field, and who may subscribe to a journal, or may simply buy rights to a particular article of interest. But the most forward-thinking publishers, like Tim Ingoldsby, director of business development for the American Institute of Physics (AIP), publisher of scholarly journals in the field of physics, astronomy, etc., have long recognized that the authors who create the journals’ content are the most important customer base of all. “Although university librarians are the primary buyers of subscriptions to our journals, we have long realized that the actual customers for the services we provide are the authors and researchers in the physics community,” explained Tim Ingoldsby.

Each journal article is submitted by a customer/researcher, reviewed by customers/researchers and approved for publication. Who are the expert referees who decide whether or not a scholar’s work is significant enough to be published? Tim Ingoldsby explains, “to become a referee for a scholarly journal, scientists must first create a body of work by publishing in journals, then they apply to the editor or editorial board to become referees for the journal.” Being published in an AIP journal is a prestigious event for a scientist and a major milestone in their careers.

So customers create the content in scholarly journals and they vet and approve the content in scholarly journals. Of course, drafts of most of these articles are made available online well before official journal acceptance and publication. Many researchers post their articles for peer review on their institutions’ Web sites or on domain-specific sites, as well as on their own home pages. By the time an article has been refereed, accepted, and published in an authoritative journal, the chances are great that it has already been noticed and even cited by fellow researchers in the field. Nevertheless, what the researcher cares about is the prestige of being published in these authoritative journals.

National Semiconductor: Help Customers Create Their Products

What about situations in which customers want to create or design products but aren’t interested in sharing their proprietary designs? Can you increase your revenues and profits by helping your customers create their products? Just ask National Semiconductor. National makes analog chips and other components used in cellular handsets, displays, and electronics such as medical, automotive, and test and measurement devices. These are the components that are used to deliver audio, provide sharp images, and extend battery life. Its major corporate customers include Motorola, Nokia, Samsung, and Siemens. Think consumer electronics, mobile phones, medical imaging, display systems—in short, all of today’s best-selling products. Not only are sales robust, but National’s gross margins are nearing 60 percent—an all-time high!

What are the most important things for the designers of these consumer electronics products? Time-to-market, clear audio, crisp video, efficient battery power, reliability, and efficient manufacturability, among other criteria. So, since 1997, Phil Gibson, now vice president of corporate marketing at National Semiconductor, has been providing National’s most important customers—the design engineers who design these products—with an online design environment, WEBENCH^®, that lets engineers select parts, design circuitry using those parts, analyze the design, build the design, test it, and iterate in record time.

                                                                              WEBENCH^®

Copyright 2006, National Semiconductor

What’s the result of providing these design tools to the customers who design their products around National’s components? The number of electronic designs per month being done using National’s WEBENCH online design environment increased from 2,000 per month in the year 2000 to 20,000 product designs per month in 2005. National Semiconductor grew almost 20 percent more than the rest of the players in each of the analog component markets it serves: standard linear, power, amplifiers, data conversion, and interfaces. The company has achieved record gross margins for 10 consecutive fiscal quarters and historic levels of profit. The evidence would suggest that helping customers to create the products they desire is a winning strategy.

Threadless: Selling Customers’ Designs to Other Customers

What about letting customers create the designs for the products you manufacture and sell? That formula has proven to be an extremely profitable one for Threadless’ founders, Jake Nickell and Jacob deHart. The two “Jakes” met on an online design forum in 2000. Both young men lived and worked in the Chicago area. They both loved good design—in print, art, and online.

What works so well about Threadless is that its customers, who are design-conscious people of all ages and from all over the world, value one-of-a kind clothing designs. They don’t want to be seen wearing mass-produced apparel. T-shirts have become a fashion statement. The cooler the T, the cooler the person. So, the Threadless business concept is to have a constant supply of unique, fresh designs and to produce a limited quantity of the designs that customers like the most. Fresh new designs keep these style-conscious consumers coming back for more.

Customers Submit Their Own Designs. Here’s how Threadless works. Designers (both amateurs and professional graphic designers) are encouraged to submit T-shirt designs for other designers and potential customers to rate. Each week, several shirts are selected as the winners and are produced for others to buy. The winning designers receive a cash prize as well as recognition and acclaim. Back in 2001, the prizes were originally $100. In 2003, the prizes were $500. By 2005, winners received $1,000 ($750 in cash and $250 in store credits they can use to purchase their own shirts or others’). The name of the design and of the designer are printed on the back the T-shirt he or she designed. And the winning designers are interviewed and featured on the Web site.

Customers Rate Designs. As a registered member of the Threadless community, you can rate designs on a scale of 0 to 5. At the same time, you can indicate whether or not you are really interested in buying the shirt, if it wins. And, you can post reactions, comments, and suggestions. (Designers say that they value the criticism and suggestions that are liberally doled out on the site.)

  After the seven days of rating are up, the founders evaluate the top-rated designs. Jake describes the process of picking the winners this way:

“We basically look at the top 100-500 designs every month and pick out 20-30 designs that we want to print. They are not always the top scoring designs but we do use various scoring queries to help us determine which designs will sell the best. For example, users who score a design high and have bought a shirt from us have their vote counted a little higher than a user who has never bought a shirt.”

By 2003, the Threadless “experiment” had generated $320,000 in revenues. There were 40,000 active raters and buyers, and 17,000 people had submitted designs. By 2004, Threadless had grown to $1.6 million in revenues. By the end of 2005, more than 300 winning designs had been chosen from 60,000 submissions. Each week, Threadless was releasing three new T-shirts and reprinting four revived designs. The active community had grown to 100,000 users, with an average of 1500 signing up each week. Revenues had grown to $2 million.

Comments

[Miles Sims]

Karmaloop does offering some creative 'street team' and affiliate programs. They seem to have good focus on their high fashion niche.

We are doing apparel but with quite a bit of a twist that will allow for another layer of customers-as-creators on top of what is out there today.

[Patty Seybold]

Miles,
Good luck with your site.. Based on the name, InnerTee, will you be doing more T-shirts, or something different??

So, is the customer whose perceived value you're concerned about, the customer who comes to buy or the customer who comes to design or both?

As far as I can tell, customers-as-creators tend to get a lot of personal gratification from having their designs produced commercially.

In terms of perceived value for the end-customers, what seems to work the best is for the customers to feel as if they're part of an "in crowd."

One company that does a good job of involving customers as promoters is Karmaloop--Greg Selkoe's company.. have you checked them out?

Patty

[Miles Sims]

Great article. We are working on launching a new site based off of some of the principals mentioned and one of the hardest things is managing the customer's perceived value.

Easy enough to do on site like Flickr as you as sharing your own content with others, not selling it. But a bit harder I think as you shift into an ecommerce environment where you are making money off of customer content and must strike a balance between your margins and keeping your customers happy with whatever % or bounty they get.