“Fool me once, shame on you, fool me twice, shame on me” – this sentence encapsulates the essence of the hype around the creation of Wow in marketing. There is no doubt about the importance of creating experiences and increasing awareness, but the problem arises when this is the base of the business. Many small, medium and even large companies in the digital space are shouting the outworn slogan — “content is king”, and surprisingly, they are selling quite well. Although there will always be a need for interesting and engaging content, it needs to available easily, possibly even automated. This thinking has spawned an entire industry of people automating content in different ways. These contents are good to be available, but it doesn’t make the content engaging, even if it is automated. From here we come to a one sort of conclusion; Wow is important, automated content is important, but the big picture is more important.
Too often marketing companies build their business only to “create wow” and refuse to see how everything is connected in a larger scale. In a sales pitch, there is the possibility of getting the sale through the Wow factor and few empty promises. The trouble arises some time after, when the customer has met the reality that the Wow factor is outdated and there is nothing new available, without another investment. Here hits the buyers-remorse, but as it has been seen, personal failures are hard to admit. Crafty salesmen find more opportunities in these situations, but for the customers the position is a nightmare. They have made an investment, which turns out to work only with further investments. Changing the service provider is a difficult, since it is expensive and would include personally admitting the bad judgment and failure.
What if both companies notice the situation and are equally large? To be honest, this situation has happened quite often during the past years, but only reading the great paper by George A. Akerlof, “The Market for Lemons: Quality Uncertainty and the Market Mechanism” from 1970, I understood the problem here. With large customers and service providers, the deals tend to be big and both companies have equal amount of leverage towards each other. With the customer, the leverage is in the value of the contract and the service provider leverage is the cost of changing a large infrastructure. Here we come to a situation where the margins are low for the service provider, but the customer has to be kept satisfied, whereas a customer is paying big money for a system that is not according to their ultimate needs. Now comes the use of leverage. The customer needs more effort to turn the system usable after the wow effect has faded, but is unwilling to pay any premium for it. The service provider then needs to engage more resources to the customer to keep them happy, possibly without getting any extra margin. All this work from the service provider is away from the larger margin cases and if not losing money, they definitely are not gaining any. The customer side is all the time unhappy, but use the leverage to barely keep the head out of the water. This is a classic lose-lose situation. Both are equally loosing money, and neither is winning any.
The contracts between two companies can be anything from three to six years in length, which can tie the resources for a really long time. I would love to go here into the importance of strategy, but since this post has a wider scope, we can just leave it to the fact that the strategy of the service provider is important to both buyer and seller. Also the wow factor can have some value, but mostly it will be a really expensive and unsuccessful brand campaign, as the real value for both operators are derived from somewhere else.