Implied Customer Contracts

I’m not even sure how to articulate this and I’ve been thinking about this on and off for almost 3days now. In the spirit of blogs, this is just going to be a rambling rant. So here goes. . .

Something is going on in the Internet industry that goes beyond the concept of “brand” make popular by David Aaker and other.

Google has built so much brand equity behind the whole concept of “don’t do evil” that its users have given it incredible leeway in the way it conduct business and release products. The web accelerator product, its adware guideline, and autolink that would have raised much more scrutiny if a company like DoubleClick did the same thing.

Claria on the other hand is trying as hard as it can to figure way to legitimize itself and find more above board business model – in order to find a way to find an exit despite huge revenue #’s. (I heard rumors of $100M +). If Claria tried any of Google’s tricks, all hell would break lose.

Microsoft has spent billions to create a gentler and kinder image. Passport failed for variety of reasons including lack of trust from the user base.

The eBay community has made a habit of voicing its displeasure on any changes (for better or for worse) to the website (many times rightly so).

Yahoo used to change its relevancy rank algorithm without much uproar but advertisers are now quite sensitive to transparency of its process. But comparatively, its users certainly have not demanded the kind of transparency that eBay’s has given even though the overlap between its advertisers and eBay’s sellers should be significant.

The overlap between the user bases of the various companies is intriguing. This is not about the brand preferences of different users segments; but that given the same person he or she has different expectation from different companies on the way they conduct their businesses.

I call this expectation - “implied customer contracts.” Brand is more about preference, value, and choice. Brand rarely illicit uproars unless something seriously goes wrong. “Implied customer contracts,” on the other hand, is much more. It limits (or opens up) the strategic options of the company whether it is a new product, a new acquisition (MSFT buying Claria), or new strategy. Customers seem to believe that there is an unspoken contract between them and the company on how the company is “allowed” to behave. Anything outside the implied customer contracts, huge displeasure is voiced as if a contract was breached. In many ways, customers are running the show more so than ever before.

How did this happen? Certainly, the Internet is an exciting medium and technology that elicit incredible emotional response. But more so, many of these technologies effect our quality of life more deeply than anything else we’ve seen in the consumer business previously. We spend more just as much time now on the web as we do watching TV (more so if you count work hours). Furthermore, the interaction is active versus passive. The quality of our web interaction and its effect on our sense of “normalcy” is deeply ingrained into our routines. Any change to our web experience seems to elicit the same response as if our favorite route to work is suddenly closed. Certainly not “material” but deeply unsatisfying and worth bitching about.

Companies need to be exceeding aware of the action it is taking today and how that action and future actions will accumulate to create customer expectations that might be a strategic weakness or strength later on down the road. Careful planning and communication is needed to really create a coherent “implied customer contract” that allows for flexibility and goodwill from its customers. It is much harder now for incumbents to change the way their customers expect them to behave. Like real contracts, I believe this “implied customer contract” could eventually become a liability. For many ‘net giants this expectation could become their Achilles heels. Clayton M. Christensen concept of “innovator’s dilemma” could become more acute than ever.