“You’re measuring customer loyalty the wrong way” & other lessons from Alibaba
Alibaba is one of the most beautiful examples of long-term oriented platforms that put the customer first, without any compromise. Every time I visit them - which is quite often - I learn something new, which is definite proof of their extreme adaptiveness to their environment. Don’t mistake them for plain retail company, though. Above all they are in the business of information: information that allows them to put the customer first, find partners, expand and be loyal to their own customers.
Here’s what I learned from them on nexxworks’ most recent (custom) China Innovation Tour:
1. Fire up the future with partnerships
With global ambitions in mind, Alibaba is preparing for a time when American giants Google, Facebook, Amazon and Apple will have caught up with this Chinese giants' new retail (offline-merge-online) ecosystem. They calculated that would be in about 3 years from now. They believe most physical stores in U.S. and Europe will have become fully digitized by then, just like Alibaba has been doing in past few years with 1 million of them already. True, there are examples like the Amazon Go stores, but these are merely small scale experiments which pale in comparison with Alibaba’s scale of launch.
The question for Alibaba is now how to tap into the Western markets alongside the American data giants. I sense it is about picking the right partners, and most likely choose those retail brands who they work well with in China. Nike is runner up in my opinion. Take into account that Alibaba’s eagerness to partner up over here leaves some pretty interesting opportunities for European, and even Belgian brands who are prepared to move at China speed.
2. Information over commerce
Alibaba is not trying to win the war on e-commerce or retail, but the war on analytics. He who understands the data best will thrive and leave all the rest to shame. That’s because the value of information always trump that of blunt sales, especially in the long term. That’s why Alibaba favors partnering with brands who manage the data better, not the brands who generate the better sales. They believe the latter will be the winners soon enough.
I really loved the example about how an unknown European brand took 60% of the market share in China from the global market leader in merely 1 year. The reason: they looked at LIVE DATA, not BIG DATA and adapted their messaging instantly. Another example was a brand that had 4500 landing pages on their mobile site to adapt to every customers' preferences with A.I. Maybe the number of newly created landing pages could become the new MAU (monthly active users) measure for investors? Should we call it MAL (monthly active landing pages)?
For me, this is yet another example of how Alibaba’s customer driven mindset is long-term oriented, rather than driven by short-term sales revenue obsession.
3. Measure your own loyalty, not that of your customer
According to Alibaba, one of the big problems of Western brands is that they keep trying to catch the customers’ loyalty and measure that. The issue is that brands are not very loyal to the customer, so why should customers be loyal to the brands? Brands should measure the loyalty they have towards customers, not the other way around.
I’ve been advocating for years now that NPS (Net Promotor Score) has been fooling traditional western corporates: it tricks them into believing that they are doing a great job in customer service, with a pretty twisted measure of customer loyalty. Alibaba understands that loyalty has to come from the brand towards its customers, and not the other way around. A great place to start is by focusing on brand influencers, and by building loyal relationships with them. I await the NPS awakening moment, when the same consultants who promoted NPS will have to explain why it does not correlate with the results anymore. Time to kill NPS, I’d say, and focus on building 1 on 1 relationships with customers and influencers using technology.