The Age of Crowdsourcing and Word-of-Mouth Research

"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.