The Age of Crowdsourcing and Word-of-Mouth Research
May 29th, 2006 by Brett Hurt | Founder and CEO"Welcome to the age of [crowdsourcing]. Just as distributed computing projects like UC Berkeley's SETI@home have tapped the unused processing power of millions of individual computers, so distributed labor networks are using the Internet to exploit the spare processing power of millions of human brains".
- from Wired Magazine, "The Rise of Crowdsourcing", pages 177-183, June 2006
As I was reading my latest Wired magazine, I was really struck by this article. The Internet has revolutionized business in so many ways, but "crowdsourcing" may be the most revolutionary application to date. Think of Wikipedia, Linux, eBay, YouTube, Google's ads, and the many other businesses that have been created by connecting the power of the crowd via the Internet.
So how does crowdsourcing apply to eCommerce? Well, it is leading to the creation of entirely new businesses. For example, look at Threadless.com. It is on track to earn more than $20 million in revenue this year by crowdsourcing designs for t-shirts. They sell one-of-a-kind shirts that are vetted by the crowd as the best. You can see something similar happening on Zazzle, which has a more professional feel (not as much of a MySpace community feel as Threadless.com). In addition to t-shirts, Zazzle lets you apply the crowdsourced designs on posters, mugs, postage, and cards. Although you could dismiss these businesses as too niche or fringe to matter, it would be a mistake to do so. They are revolutionizing merchandising by crowdsourcing.
Crowdsourcing may be best put in context by James Surowiecki's book, "The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations". The book title is self-explanatory and describes how businesses can be revolutionized by "the crowd". Add the Internet and the shift to consumer-generated content, and you create some very exciting business potential.
Think about JCPenney's launch of their new ana line. The idea for the new private-label line for women came to JCPenney directly from customer feedback. How does JCPenney evolve this line quickly? They listen to the customer feedback carefully. And online product ratings and reviews would enable JCPenney to do this in an archived fashion. Although word of mouth primarily occurs offline, it is only in the online channel that it is archived for thorough analysis.
Remember the movie "Big" staring Tom Hanks? What made his character, Josh, so successful? He could think like a kid and spent his time around kids while designing toys. The toy executives scratched their heads on how his seemingly absurd approach to his job was actually working, and there is some truth in this movie to today's modern merchandising world.
The fact is that a lot of merchandising research is done with traditional focus groups. Put a toy in the middle of the table and watch how the kids interact with it while you stand behind one-way mirrors observing. While this is insightful, it only tells a part of the story and is subject to group think, the personalities of the participants, and the environment that the subjects are placed in. Do the same type of research by analyzing "the crowd's" opinion of the product, and you will learn far more. Other techniques include executives doing store tours and speaking with the merchandising managers, which certainly help as well. But they are also flawed by limited information. Surowiecki says that the most intelligent decisions are made by the crowd when they are in conflict or disagreement. And we see this happen frequently with product ratings and reviews. One reviewer will correct the other with their "better" opinion. How else do you explain the social phenomenon of over 2,600 reviews of "The Catcher in the Rye" on Amazon.com?
Here are some other interesting examples:
1. At WOMMA's first "Word of Mouth Basic Training" event, I learned about Kettle Chips People's Choice campaign to select a new potato chip flavor to produce based on the input of tens of thousands of customers via their website. The public relations results from this campaign were unreal, with the media covering this from coast to coast. And, as importantly, Kettle Chips got hundreds of legitimate ideas (cotton candy flavored potato chips not being one of them) and produced two new flavors (Thai Spice and Cheddar Beer). They honored those customers that participated with their names printed on the bags, which you can find at your local grocery store (Whole Foods being a major carrier of Kettle Chips).
2. I already beat this example to death in the past, but it is worth linking to again. Kryptonite is an example of a company that didn't listen to the crowd (see the Fortune article link).
This is only the beginning. Source your own crowd and reap the rewards.
June 2nd, 2006 at 12:46 pm
There.com is an interesting example of a company that uses crowdsourcing. There.com is a multi-user game, which allows users to develop items for the game, such as vehicles, clothing, buildings, items, etc. In the game there are clothing designers who actually release texture maps and models for clothing they are designing for “real-life people” in the game first. They then get reactions to styles, colors, etc for clothing based on how well the items sell (or don’t) and consumer feedback. Afterwards, they take the in-game feedback and apply it back to the real-life designs that then make it to shelves in clothing stores.
June 6th, 2006 at 2:22 am
Ericka, I am familiar with There.com. Great example. The Internet game I developed in 1990 (Renegade Outpost, one of the first MUDs or Multi-User Dungeon) had a similar “crowdsourcing” feel. As a matter of fact, I was intensely focused on the feedback of the players and the beautiful thing about it being Internet-based is that I got near real-time feedback on new features I added to the game. Over time, Renegade Outpost morphed as players created their own worlds and quests for other players to explore. So much so that eventually only 50% of the game was still known to me.
As a company becomes slavishly dedicated to serving its customers like There.com, that will be a very exciting time for companies as well as consumers. And will ultimately lead to a profound increase in word-of-mouth. The interesting thing about the Internet connecting us all is that I don’t think it gives companies the choice, long-term, to ignore customer feedback. Not that most intentionally ignore it, they just aren’t set up to really listen to it.
July 8th, 2006 at 4:29 pm
[...] Community-driven commerce is a window to the future [...]
August 12th, 2006 at 2:11 pm
[...] So, it makes sense to me that last week Yahoo! announced a contest for users to create their own Yahoo! advertisements. This is a smart way to generate word-of-mouth for the new Yahoo! It reminds me of what General Motors did recently for The Apprentice. Here is my blog entry on that topic. You may want to check out some of the new Yahoo! user-generated ads - some of them are quite clever and entertaining. There is a lot of talent out there waiting to be tapped (remember crowdsourcing?). [...]
August 23rd, 2006 at 10:33 am
Hello,
in the same concept, look at this website that I’ve just noticed http://cecrowdsourcing.blogspot.com/ This is a further step on the crowdsourcing as it aims to design and sale electronic products for the first time (it’s hardware development and not software for this time). The company’s name is Logoden. It looks promising but it’s just started. I’d recommand you to join this community, who knows it can work and you can potentially earn money.
August 23rd, 2006 at 1:57 pm
Ventus,
This is interesting, but I wish Logoden had put more effort into it. We’ll see if it takes off.
For some reason it reminds me of that commercial, “Inventors - patent your ideas now call 1-800-xxx-IDEA”. I have been skeptical. If you compare this site to Logoworks, Threadless, and others - they are much more professionally crafted (which should engage the crowd more).
Best,
Brett
September 5th, 2006 at 8:09 pm
I’m surprised there’s no mention yet of one of the pioneer sites in Crowdsourcing; Amazon’s Mechanical Turk (www.mturk.com). They launched this at least a good year ago and continue to evolve it.
September 6th, 2006 at 6:57 am
Good point, James. That wasn’t intentional and you are right, it is one of the better examples of crowdsourcing. Amazon is usually at the front of the adoption/innovation curve.
December 2nd, 2006 at 10:31 am
[...] How should you leverage photo reviews? With contests and multichannel recognition. Don’t just run a contest for a gift certificate give-away for customers that write a review and include a photo, post the winning photo on your home page! Use it in an email campaign. Use it in a circular. Use it in an in-store display. If your community of customers sees that all three elements - ego, social connection, and good karma - are maximized by you, then it will spark customer participation unlike anything you have seen before. Threadless’ entire business model is based on this, and I think it is a brilliant application of the three. [...]
December 27th, 2006 at 12:55 am
[...] First of all, I have written about crowdsourcing a few times on Bazaarblog (see my May post, September post, or early December post), and I have also referenced the book "The Wisdom of Crowds" several times. 20 Questions is the wisdom of the crowds. It is a database of over 46,700,000 (and rapidly counting) individual games played by "the crowd". The crowd, of course, is you, as in "you: the person of the year" (as you have recently been named by Time magazine). Yes, 20 Questions is a huge database of consumer(player)-generated content! [...]
March 17th, 2007 at 7:29 pm
[...] Yes. I think we’re seeing a major shift in the online value chain. The initial killer application of the Internet was email (one-to-one), followed by websites (one-to-many). We’re now seeing the creation of a whole class of tools that easily allow people to create, organize and publicize content (many-to-many). With so much content being put online every day, the big challenge (and opportunity) is to find ways to help people discover the stuff that is relevant to them. Leveraging the “wisdom of crowds” to intelligently filter/recommend content is a very large and meaningful opportunity. [...]
April 7th, 2007 at 10:27 pm
[...] The Coop will accelerate the hyper-education of consumers that is underway. It is just a matter of time when consumers have nearly instant access to global peer ratings and reviews on any product, service, place, person, or thing. Access no matter if they are shopping online or offline. While that may sound scary, it will actually be a beautiful thing. Markets will become democratized, smart companies will react quickly, and as a result "consuming" will be driven to higher levels as shoppers gain more confidence to buy when leveraging the wisdom of the crowd. Manufacturers will build better products, service providers will respond with better services, and companies will become more customer-centric. Everyone will benefit, but the short-term disruption will make the old guard question the revolution underway. Change is often difficult. [...]