I pledge allegiance to VRM

As my interests continue to shift away from the music business (whatever that is) and towards markets generally, I become more and more convinced that the focus must be on VRM.

The Cluetrain famously stated (10 years ago) that “markets are conversations.” Doc Searls recently amended this by stating: “markets are relationships.”

The fallacy of CRM is that – when done “right” – you could lock the customer in. Nope; remember, markets are relationships, and relationships are voluntary. VRM is the reciprocal of CRM: the customers – when provided with the right tools – engage the vendors in a manner that benefits both customer and vendor.

Note above, that I didn’t say I was moving away from the music business to marketing, but rather to markets. I feel today about marketing the way I felt about building communities a couple of years ago when that was all the rage: you kinda can’t…market or build communities.

What you can do is conceive of markets that reduce friction and increase engagement between the vendor and customer.

Think about the things that have gotten traction; they tend to do so not because of some marketing “guru,” but because their place in the market is one of reduced friction, and one where tools are created for the customer to better integrate with the company (and, please, please note, often these tools aren’t created by the company).

The obvious example is Twitter. The traction occurred because it reduced friction. Essentially, it made blogging dead-simple and instantaneous. Friction was reduced at the point of creation (no wonky CMS – just type and post) and friction was reduced at the point of delivery (no going to a url; the tweet/blog post just shows up).

Second, tools were created to allow for better integration. An entire industry has sprung up around Twitter: desktop clients; url shorteners; mobile apps; geo tagging services; etc. The goal of all of these tools is to help the customer better relate to the vendor. Tumblr is aspiring towards the same thing, but until additional tools emerge and friction is reduced (it’s still too much of a pain in the ass to post to a Tumblr blog), it won’t work.

Some time ago my friend, Chris Skinner, said that the whole idea that the percentage of the online market would cap out at around 12% was crazy. Chris correctly reasoned that what would expand the online market share was better tools; essentially, easier ways for the customer to manage their relationship with the vendor. This was pre-explosion of the iPhone and (lesser) explosion of the Kindle. Both of these tools (iPhone and Kindle) allow for a better experience between the customer and the vendor. The customer – using a Kindle – can now determine how they want to interact with the vendor rather than the vendor telling the customer how she will interact. The consequence of this is that online sales break through the 12% threshold, and keep marching on.

As with so much in my life, my obsession with music and the music business (whatever that is) provides an easy way in for me; a way to take something of a complex concept and understand it by applying it to something (maybe the only thing) that I deeply understand. To a certain degree this is already happening in music. The tools (the iPhone, for instance) are allowing me (the customer) to have a better relationship with the vendor. If I want a record while I’m a passenger in a car, I can – with relative ease – download it from iTunes.

The promise of the cloud is simply that I won’t have to download, I’ll just access it. It seems apparent that Apple bought LaLa because they wanted the tools that LaLa had created (apparently, LaLa’s deals with content holders don’t allow them to be assigned, so I can’t imagine what else Apple bought). LaLa works well currently because it’s a tool that allows me (customer) to manage my relationship with vendors (record labels) in a mostly-palatable manner. The net impact: I (and others) engage with and purchase more music than ever before.

Let me tell you, it ain’t easy. The larger content holders tend to arrive at the conclusion to allow easier engagement with their content only when they are given many millions of reasons to do so. These payments either come in the form of advances or royalties. The current system clearly isn’t working. LaLa, for as great of a tool as it is, clearly didn’t just sell to Apple because they wanted to; they weren’t making it on their own financially. The fire-sale prices for iMeem and iLike both represent another failure of VRM; the agreements with the labels that those companies had to enter into made it impossible to remain going concerns even while their tools were being used by customers to better interact with vendors.

The lack of an iPhone app for Mog; Spotify’s failure to (yet) launch in the States; etc. These too are due to untenable transaction costs. The end result: less decent tools, less decent engagement between customer and vendor, and less potential for revenue growth. Well done.

My hope is that content holders will make it even easier for their customers to engage with their content. That is my single-minded obsession with a variety of the projects I have the privilege to work on. I was asked by my friend Jason Feinberg to comment on a recent excellent post of his predicting what might transpire in the music business in 2010. My only real contribution to his piece was – even though I didn’t use the phrase – about VRM:

My big prediction, however (and I’ve buried it here, assuming that no one will have bothered to read to this point), is that we’ll leave the dark ages of online retail, and – via APIs, widgets, etc. – content filters (i.e. blogs, etc.) will be able to sell directly to their readers rather than directing them to amazon/itunes. In the not distant future we’ll look back on the time when we would introduce people to music and then send them *away from our site* to some other site for the purchase as unbelievably stupid.

I feel safe in predicting this will happen because one of the sites I work on is going to launch this very practice in 2010. This is how I like to make predictions, knowing the outcome.

So, that’s my goal: help the companies I work with provide more and better ways for their customers to engage with them. One of the principles of VRM is that “Customers are born free and independent of vendors.” Another is, “Customers can assert their own terms of engagement and service.” It would behoove all of us on the supply-side to remember these things.

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  1. LyricalVenus’s avatar

    I think I get the idea, but what exactly do the letters VRM and CRM stand for? (maybe I need to go back and read some previous posts…)

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  2. George Howard’s avatar

    Sorry:

    CRM = Customer Relationship Management
    VRM = Vendor Relationship Management

    best,

    George

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  3. speedyd’s avatar

    I as an Artist/DJ/Producer/IT company owner for one agree completely. The best thing to do is keep it all “in house” instead of outsourcing as much as possible. That way the customer (who's familiar to you (the owner)) will be more confident in buying from you because there allready is a stable relationship, otherwise he wouldnt come to you in the first place and seccond, the customer has just ONE stop to make for all his or her needs

    Dj Speedy-D aka R Verhoeven

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  4. han delfers’s avatar

    “…we’ll look back on the time when we would introduce people to music and then send them *away from our site* to some other site for the purchase as unbelievably stupid.”

    That puts it into perspective.
    embeddable google forms has done a lot for me in terms of frictionless feedback.

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  5. jp’s avatar

    “Customers are born free and independent of vendors.”

    The flip of this is what every corporate vendor desires. git em while they are embryos.

    Another great piece though George, thanks. And though I have the same feeling of watching Lucy put the football down for Charlie Brown's field goal attempt..I sincerely hope you are right.

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