The Customer Knows Best

UPDATED: May 7, 2010
PUBLISHED: May 7, 2010

Rob Langstaff knows shoes. He spent 16 years working for Adidas, including three years as president of Adidas Japan and one year as president of Adidas America. Yet, when he walked away from the second largest athletic shoe company and started his own business in June 2008, it wasn’t to impart his extensive expertise on shoes to others, but to let others design the shoes they wanted to wear.

“I thought that a lot of companies had lost touch with their customers,” Langstaff says. “In a lot of market-driven companies where you’re marketing to the 17- to 25-year-old bracket, the marketing managers are usually men in their 40s and 50s.” Instead, Langstaff wanted to take a bottom-up approach, giving customers input into the design. “You get a lot more diversity and range of ideas.”

From that concept of tapping into an existing customer base, sprang RYZ (pronounced rise), Langstaff’s online shoe company featuring a line of shoes designed and selected by customers who vote on the ones they like best. The winning designer, chosen partly by users’ votes and company officials’ discretion, wins $1,000. RYZ then manufactures the shoe and sells it on its Web site.

RYZ is among an increasing number of companies embracing this customer-knows-best approach. While each follows a slightly different model, they all fall under the umbrella of crowdsourcing, a term coined in 2006 by Jeff Howe, a contributing editor at Wired and author of the book Crowdsourcing: How the Power of the Crowd Is Driving the Future of Business. The term is loosely defined as taking a problem usually handled by a specific person (typically an employee) and presenting it to a broad, undefined group of people, or the crowd.

Using the Crowd to Solve Problems

The best-known example of crowdsourcing is Wikipedia, the free, user-contributed online encyclopedia. Netflix also used a crowdsourcing model to improve its movie recommendation system, awarding $1 million last September to a team that came up with a better algorithm.

But you don’t have to base your business’s entire product or service on crowdsourcing to benefit from the wisdom of the masses and develop a stronger connection with your client base. Companies that specialize in providing crowdsourcing solutions are increasingly popular among small businesses that want to build relationships and tap into the community for feedback, while potentially saving time and capital that would be spent on solving big problems or brainstorming innovations. Some examples:

Companies like InnoCentive act as the middlemen between businesses with wide-ranging problems and people who want to try and solve them for a fee. Businesses, which may remain anonymous, post their challenges and corresponding bounties, and InnoCentive’s solver community of experts can work on whatever problem they want at their own leisure to try for prizes.

The website Brand Tag asks users to type in the first word or phrase that comes to mind when they see a particular brand, giving each company a list of searchable tags associated with their brand.

Lead Vine allows business owners to post sales leads they’re seeking, name their referral fee and have the online community act as an extended sales force.

And Inkling Markets provides crowdsource testing of your online or product designs, as well as identification of the most promising projects in your portfolio.

Engaging Your Community

Online T-shirt companies Threadless, founded in 2000, and Cameesa in 2008, use different variations of crowdsourcing to design and select T-shirts to sell on their Web sites. Threadless uses a combination of voting and its own discretion to determine which T-shirts are printed, while Cameesa relies solely on crowdfunding, in which participants buy shares of the design they like, and shirts that reach $500 get printed and offered for sale. Then each shareholder receives a free T-shirt and royalties for every shirt sold. The winning artist receives $250 plus $2 for each sale after 125 have been sold.

But you don’t have to employ a specialized service to get a taste of what crowdsourcing could do for your business. If you’re savvy on Facebook or Twitter, try using those sites to reach out to your existing communities or fans. For example, says Howe, “if I were running a moving company, I’d want to be on Twitter and Facebook, talking to everyone who’s moving and finding out what their concerns are,” he says. You can use this feedback to improve customer service, tailor discounts or target certain areas of town. Whether or not the people who provided the feedback become actual clients or not is irrelevant. The point, Howe says, is that you are building and engaging a community. “Find your constituents and become friends with them.” Retail giant Best Buy’s Geek Squad is now on Twitter, answering its customers’ questions. Wikipedia founder Jimmy Wales points out that often other people who are not part of the Geek Squad will see the question, know the answer and respond. “And it’s sort of engaging the whole community,” Wales says. One question can elicit multiple answers, and other people who may have the same question can also benefit. This kind of interaction builds brand identification and customer loyalty.

The Biggest Drawback… and Benefit

Some of the benefits of crowdsourcing are obvious. For one, it’s cheap, although experts say that shouldn’t be the only reason to employ it. Crowdsourcing also can empower customers and engender loyalty. By giving customers the power to design the shoes they want, Langstaff says they feel a certain ownership of the company. The same would hold true for a company that used Facebook to tap into its customer base for help in solving a customer service challenge.

While there are many benefits to crowdsourcing, there also can be disadvantages. One is the quality or reliability of the product, whether it’s T-shirt designs, market predictions or encyclopedic information.

Cameesa co-founder Kamil Chmielewski says he worried the site wouldn’t attract serious artists. Cameesa has tweaked the rules, such as taking down a design if it doesn’t get funding after 30 days, but ultimately, Chmielewski’s concerns were unfounded. The company currently has 140 designs on the site, and the quality is constantly improving, he says.

Relinquishing control can make business owners uneasy, but Chmielewski says it’s worth the risk to discover what research and development often fail to provide: what customers want. “We do feel that the problem with companies these days is that they believe they know what the people want,” he says.

Crowdsourcing takes some of the guesswork out of establishing your customers’ motivations for buying. And today, businesses using crowdsourcing are continually refining their models to help shape and drive business. People from all over the world can now work together, share ideas and form communities. And experts agree that community is really what crowdsourcing is all about.

Looking for more resources for crowdsourcing? Check out this web exclusive list of crowdsourcing companies.