The Conversational Economy

Part I: The Dawn of the Conversational Era

Markets are conversations. Trade routes pave the storylines. Across the millennia in between, the human voice is the music we have always listened for, and still best understand.

— The Cluetrain Manifesto, 1999

Long ago it was obvious that markets were conversational. You’d visit the bazaar, browse the wares and meet the merchants. You might have a relationship with the shopkeeper who refilled your weekly staples or the cobbler that fixed your shoes. In the early industrial economy, you might have dealt with traveling salesmen for a number of different products. You talked, you bought, and they remembered you.

In the past, each sale, each “conversion” was highly dependent upon how the conversation went. Yes, was the product itself good, but also, was the salesperson knowledgeable? Did they help me find what I needed? Did I trust them, did they hear me? Do they remember what kinds of things I like and dislike? Do they serve my particular needs, even as those needs evolve over time?

Similarly, customer retention was a function of how that conversation evolved over time. Individual conversations with the salesperson, shopkeeper or craftsman constituted an ongoing “conversation” out of which your purchases organically emerged. Purchases were bookends to parts of an ongoing conversation, and as that conversation was sustained, in good faith and with trust on both sides, so too was your loyalty to that merchant.

Over the past half century of mass production and mass marketing, these conversations have been distorted and fragmented. In a world where physical distribution — of both products and of media — required massive scale, the business models that naturally arose to govern the exchange of stuff were often impersonal, uniform and alienating.

Mass marketers became experts in creating one-size-fits-all messages delivered by a handful of media gatekeepers to promote one-size-fits-all products carried by a handful of mega retailers. When marketing spoke, customers listened. These media and commerce channels enjoyed a tight symbiosis which primarily served the purpose of one-way communications from businesses to customers.

In the mass marketing era, the customer conversation didn’t go away, but it became diluted across every TV & print ad, every coupon, every unsatisfactory purchase, every support call where they sat on hold, and every email complaint gone unanswered. Even as advanced targeting capabilities became available with the rise of Google and Facebook, companies spoke to their customers as befit the media they were doing it with: as audiences. In many ways, online advertising has simply amplified the existing distortions in the customer conversation presented by the mass marketing era; the relationship between the business and the customer became even more lopsided.

Even when communications channels were made available to customers like mail-in feedback, customer service lines, and email support, customers rarely feel heard and frequently feel like they’re being given the runaround. How fun is it to navigate a phone tree when you urgently need to talk to a human? For millennials and gen-Z, merely being forced to talk to a salesperson or a support rep on the phone — a communication medium not even reserved for one’s immediate family — is a few steps short of torture.

Fortunately for consumers, the cracks that had begun to appear in this system with the rise of Amazon have become a slow-motion collapse of the mass-marketing status-quo over the last few years. Don Peppers and Martha Rogers, authors of the seminal 1993 book The One to One Future, were prescient to notice how the internet was accelerating trends towards a more personalized, individualized approach to marketing and sales. Instead of looking at markets simply in terms of psychographic segments and market share, they proposed companies think about their business as a collection of relationships with individual customers, one by one, and over the long run. Their warning to companies in 1993 rings even truer today:

Don’t be confused, however, by the fact that technology, to date, has not made it easy for your customers to communicate their ideas, feelings and suggestions to you. Don’t let a momentary accident of technological history convince you that your customers don’t have individual feelings and suggestions they would like to communicate to you, if it were as easy for them as it is for you.

Because, lo and behold, the end of that “momentary accident of technological history” is upon us.

Rising expectations by customers around the holistic customer experience are well established across industries. Media and entertainment, ever the canary in the internet coal mine with a product reducible down to pure ones and zeroes, showed us that people want what they want when they want it — not just what they’re given. Amazon gave it to us with low prices, two-day shipping, easy returns, proactive customer service and personalized recommendations. Through their tech-enabled business models and customer-centric practices, the companies of tomorrow are already displacing the giants of yesteryear.

Technology and new business models have coincided to deliver better customer experiences and in doing so have raised the bar for every other industry. People are frustrated when their banking app is slower and more cumbersome than Uber’s. Why should they care about how difficult regulatory and legacy code issues are to overcome, or about internal bureaucracy? Between 2014 and 2016 alone, the percentage of customers who reported they had stopped doing business with a company after a bad experience jumped from 76% to 82% (KPCB, Ovum). Customers judge companies by the ever-rising gold standards of customer experience, and large swaths of the Fortune 1000 have already begun to wake up to this reality.

The ubiquity of social media and the increasing role of word-of-mouth referrals in the purchase process both amplify the customer experiences people have across their networks as well as drive customers’ desire for authentic communications with companies. People are connecting with one another more frequently and transparently. And with always-on smartphones, our connectivity is real-time by default. No longer can businesses hide in their corporate ivory towers, blanketing the airwaves with their carefully crafted, one-way messages. In the same way that customer expectations are shaped by their experiences with other companies, so too are they shaped by the new ways they interact with the world and with their friends.

So what are most businesses to do? How can companies — old and new — keep up with the ever-rising tide of customer expectations? We at Layer believe the answer lies in another mega-trend precipitated by the mobile revolution.

As the smartphone install base matures, a powerful pattern has emerged in the way people use their devices: messaging consistently is the #1 thing people use their phones for. It only makes sense that a device whose ancestor was exclusively used for communication, and which was dubbed by Steve Jobs in the iPhone keynote as an “internet communicator,” would manifest the fundamental human need to connect and communicate.

Modern messaging apps, by their nature, are used as not simply a means of sending messages but of maintaining a conversation. That means a nearly constant loop of notifications, checking one’s phone, and responding, all the while maintaining a relevance that no other type of app notification can match. These notifications, when implemented correctly, are constantly being opted into by the user. So-called “over-the-top” (OTT) messaging is able to go far beyond mere text, and can incorporate voice, video, and a whole host of entirely programmable interactive message elements.

What Operator pioneered with its concierge shopping experience over rich messaging, others are taking to the next level. Laurel & Wolf and Havenly connect customers to interior designers to help you transform your home (and sell you furniture and accessories). Trunk Club connects you over rich messaging to a stylist with whom you collaboratively craft a custom outfit to fit your style and taste. Accolade Health cuts through the red tape of the healthcare bureaucracy by matching employees with their own personal health advisor.

The Layer-powered Trunk Club experience for stylists (left) and customers (right)

These companies are cultivating a differentiated, defensible customer relationship by anchoring their customer conversation in today’s communication medium of choice: messaging. Whether customers are talking to human reps, automated text or voice interfaces, or some combination, the UX metaphor of messaging is the anchor that companies are settling on. Beyond just chat, the companies that define the conversational economy are combining rich, interactive messages, synchronous voice and video, and powerful agent-side customer service dashboards to help their employees be more effective and efficient. The upstarts are not alone — established giants like Staples and Bank of America have gotten the message (😉). The race is on.

Rich messaging is now Amazon’s default customer service option on mobile

Companies that foster one-to-one, direct and personalized customer relationships will stand a chance in a game defined by platform giants like Amazon and agile incumbents like Walmart. Those that do not will go the way of the media companies that the internet has already hollowed out or destroyed outright. Using a rich, branded messaging experience as the backbone of the customer conversation is going to be table stakes.

But the Conversational Economy is about so much more than surviving digital disruption. It is about one-to-one technologies allowing us to return to personal and personalized commerce. It means we’ll get “mass customization at scale,” as Don Peppers put it, where customers are treated as human beings and companies are no longer guessing as to how to serve their needs. And as Trunk Club and others have demonstrated with their custom clothing services, the personalized future is about more than just raw data. It is about a conversation.

The revolution is here, and it has a voice.

In Part II, we’ll dive deeper into what a modern customer conversation anchored around messaging looks like.


Contact Layer today to see how to join brands like Staples and Trunk Club by Nordstrom in crafting your own unique customer conversation.