Saturday, 10 August 2013

Reviews are the 21st century's testimonials

Arbitrage is the practice of exploiting financial anomalies between markets, for profit. There's no exactly equivalent term in marketing; but it is possible for marketing anomalies to occur as well - and to profit from them. It's the art of learning from other industries to get a lead on your competition.

An example:
The Mac "that saved Apple"

Apple started selling computers in the late seventies. They made good computers, but so did a multitude of other companies. Then, in 1998, Jonathan Ive (now Sir Jonathan) designed the iMac. 

What was learned from other industries? The key here was Jony Ive's background - he was a designer, not a techie. It was the revolutionary design of the first iMac, not it's technical wizardry, that drove sales into the stratosphere; the genius at Apple was to effectively arbitrage between two different disciplines. It seems so simple and so obvious now, but it hadn't occurred to IBM or Dell in 1998.

So what's this got to do with reviews?

As most of our clients know, we cover the whole business spectrum, so we're able to take the lessons learned and proved in one sector and apply them to another. Here we're going to examine what other businesses can learn from the hospitality industry.

Hospitality - at the forefront of the review revolution

Up until the turn of the millennium hotels did their own marketing - they advertised, and they used testimonials; sometimes from celebrities, often just plain comments from 'Mr and Mrs P'. These testimonials were displayed on their websites.

Then, in January 2000, Steve Kaufer founded a consumer review site called TripAdvisor. User-generated content was the new buzzword (sometimes called 'Web 2.0' for short). He invited guests to comment on their experience with hotels.

At first hotels ignored TripAdvisor, but soon guests started referring to it. The hospitality industry continued to dismiss TripAdvisor as an irrelevance, until it was too late. TripAdvisor swiftly established a monopoly on guest comment. Testimonial marketing in the hospitality industry began to wither and die.

You will search far and wide to find 'Mr and Mrs P' type testimonials on a hotel website these days, for one simple reason: those in hospitality marketing recognise that, given the alternative, consumers will always opt for 'real' consumer reviews. 

The massive downside for the hospitality industry in not taking independent reviews seriously at the start of the Web 2.0 'revolution' is evidenced by the stranglehold that Tripadvisor and review driven online travel agencies now have on their market. Hotels have little option but to pay commissions to these agencies because they didn't seek out an alternative offering for their customers, they sat back and allowed TripAdvisor to fill the consumer demand. 

So what lessons are there here for other businesses? Is there any potential for 'marketing arbitrage'?

The key is to embrace the lesson learned by the hospitality industry: that testimonial marketing is over. Consumers want reviews they can trust. They want them to be verified and credible (TripAdvisor is weak here, but they are so firmly entrenched as the 'go to' travel site it doesn't really seem to matter to them). They don't want 'Mr and Mrs P' any more. And they certainly don't want to be spoon-fed testimonials by businesses.

And businesses won't want to find themselves in the same financial headlock with review sites that hotels now find themselves in with TripAdvisor.

Learn the lessons of the hospitality industry before you're being charged 15% commission for every new customer!

So: businesses should act now, before they walk into the office one day and find the smaller 'TripAdvisors*' in their marketplaces have a similar monopoly on consumer opinion. 

*Potential 'TripAdvisors' in other sectors? Time will tell, but you can be sure of one thing: the inexhaustible consumer appetite for reviews will drive them: estate agency - AllAgents? - medical - WebMD? - financial services - moneysavingexpert? - lawyers - LegallyBetter? - trades - RatedTradespeople? And then there are the big daddies: Google Local and Yelp


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