Last week I provided a brief introduction to the difference between loyal customers and prosumers, and evangelists and influencers. The basic idea is that while I might be tempting to look at the latter as “Web 2.0″ versions of the former, the reality is far different. It is not simply a case of using new technology to leverage similar types of relationships. Instead, it’s about new types of important relationships for companies to leverage, thanks to the new technology.

That post then focused on the key difference between loyal customers and prosumers – particularly in terms of profitability and impact on others. Today’s is shorter, focusing on a simple but important distinction between evangelists and influencers.

From a marketing perspective, evangelists are typically seen as those customers that love your brand so much that they’re willing to enthusiastically, and proactively, recommend it to friends and families. So in most cases, they’re not only your most profitable customers – they’re also the ones bringing new customers in. Most importantly for this analysis, they are – by definition – a subset of the “loyal customer” group.

Influencers, on the other hand, are definitely not a subset of prosumers. Moreover, they don’t necessarily have to love your brand in order to advocate in your favor – or even be a customer in some cases. The reason is simple. What makes influencers, well, influential, often hinges on their ability to discover and share interesting new things. If your company can come up with something they find compelling enough – a funny commercial, an interesting connection to a cause, a new and better product, whatever – they might well pick up on it, and help spread the message for you.

I find this subtle difference important. Prior to the Web 2.0, it was generally the case that a customer had to absolutely love you in order to put in the effort to evangelize for you. In the Web 2.0 world, anyone that finds anything you do even a little bit interesting might just be an influencer for you. In turn, it’s clear that strategies for engaging the two groups need to be totally different.

In a previous life as a branding analyst, I spent a lot of time focusing on loyal customers – and particularly the “evangelists” among them who just might recommend us to friends and family. In my current life as Director of Marketing Insight at nGenera, I spend a lot of time focusing on prosumers (customers that become actively engaged in the co-creation of value) and influencers.

It’s tempting to look at that and draw a simple conclusion – prosumers and influencers are the web 2.0 version of loyal customers and evangelists, respectively. Tempting, but wrong. This is not simply a case of using new technology to leverage similar types of relationships. Instead, it’s about new types of important relationships for companies to leverage, thanks to the new technology.

Over the next little while I’ll be explaining what I mean by this. Today I’m going to start with a particularly important contrast between loyal customers and prosumers.

It doesn’t take a rocket scientist to explain why loyal customers are so important to companies. They typically love a brand, and account for a huge share of profits (think: 80/20 rule, or some variant there of). Focus on them, and try to create more of them, and you make more money– simple as that.

In most cases, prosumers also love a particular brand – after all, they’re often volunteering their discretionary effort to help it out. Explaining why this isn’t always trued is a subject for another day. Today I want to focus on the fact that prosumers typically don’t account for anything more than a small fraction of revenue and profits – at least directly.

The main reason is that prosumers are often a very, very small group of people. While we’ve defined a wide variety of ways that companies can engage prosumers, the easiest one to understand (and implement) is simply sourcing ideas from them. MyStarbucksIdea.com is a great example, and they’ve received a lot of input from customers through the platform. But any way you run the numbers, the total participation on the site represents a very, very small percentage of Starbucks customers. There’s no way they can drink enough lattes to make THAT much of a difference.

However, the total impact that these prosumers can have is much higher than the profits they directly account for. In this case, one good idea sourced from a prosumer could improve the experience of thousands – or millions – of other Starbucks customers. In more advanced cases, where customers move beyond ideation to actually doing something, the impact might be greater still.

So the initial lesson here is simple. Prosumers are not the Web 2.0 version of loyal customers, and should not be treated as such. Companies looking at prosumer engagement, in general, should be focused on how insights and contributions from a small subset of customers can lead to better experiences for a much broader customer base – and design their strategies accordingly.

Put another way, loyal customers can have a significant impact on the bottom line – even if they have no impact on the experiences of others. Prosumers only have a significant impact if they are positively impacting the experiences of others.

Many companies have been pursuing various ways to connect their brands with charitable causes – a subset of what we call “brand as movement.” In some cases, doing so seems easy – say, a bookstore supporting literacy programs. But for many organizations, such obvious connection points do not exist, and it’s a big challenge to wade through all of the options available to them to find something that will positively impact the brand.

But there’s an interesting new trend emerging on this front. Instead of simply selecting a handful of causes to throw their money behind (and connect their brand to), more and more companies are pursuing a “microsponsorship” approach. As AdAge reported yesterday, companies like Pepsi and Bisquick allow customers to pitch their own pet projects, and those chosen receive financing as low as a few hundred dollars – though in the case of Pepsi Refresh, the grants typically range from $5,000 to $25,000.

Why I find this so interesting ties to a recurring theme on this blog – prosumerism (think producer + consumer = prosumer), where customers become actively engaged in the co-creation of value. In some cases (such as through MyStarbucksIdea), prosumers merely give ideas that the company can act on; in others (such as Lego Mindstorm) they directly innovate on top of given products and services; in still others (such as Motley Fool Caps), the prosumer community forms an entirely new value proposition all together.

In this case, prosumers come to the company with an idea for what they can do. And while they may not be doing anything for the company directly, their engagement obviously goes far beyond ideation – if they get the funding, they have to go and do what they say they’re going to do. In turn, it will be very interesting to see how this plays out – and, from a marketing perspective, what the net benefits are for companies connected to such a distributed network of “brand as movement” projects.

On a somewhat similar front, I met with the people developing WellofChange last week. What they’re doing is very interesting – providing a platform where people can volunteer their discretionary time (say, providing a golf lesson), while the recipient of said lesson pays an agreed upon price, that goes to the charity of the volunteers choice. But tied to this, they also have an enterprise version, where WellofChange acts as the platform where a particular companies employees can engage as “volunteers” – with the proceeds earned from their contributions again flowing back to the charity of their choice.

If you put the two together, it’s a very interesting twist on the “brand as movement”. Not only might companies fund prosumers to do a wide variety of charitable projects that might reflect well on the brand, but their own employees might be funding a wide variety of others as well – also reflecting well on the brand. But of course, from a marketing perspective, the long-term implications of this are a little bit hazy. If enough companies start doing one (or both), it’s hard to differentiate from the pack – and it just becomes another “cost of doing business” (though of course, good for society at large). In turn, companies that are interested in the two approaches, and are taking a long-term perspective in terms of brand building, still might want to set some parameters about exactly what types of things their prosumers (and employees) should be supporting – and why.

One of my primary research areas right now is “prosumerism” (think: producer + consumer = prosumer), which we use to describe what many people call customer co-creation: getting customers actively engaged in the innovation around, and creation of, the products and services they consume. One of the biggest questions in the space is around business models and incentives. We believe financial rewards are becoming ever-more important, and are always on the lookout for companies that might be innovating in this area.

With that in mind, I recently stumbled upon KirtasBooks, which has developed an interesting program called “invest in knowledge” – allowing individuals to subsidize the digitization of the world’s knowledge one book at a time, in exchange for 5% of of all future sales of that book through their site. Basically you pay just short of $30 to have an “out of print” book digitized, and a soft copy delivered to your door, in exchange for a cut of future sales.

Now I don’t think KirtasBooks will actually be a great success- they’ve got that pesky little competitor Google to deal with after all. But it’s the structure of the program that I find interesting, and potentially applicable to other industries. How many companies looking for new ideas and designs could have customers pay to come up with them (which helps to filter out all the crap that can come with totally open / free submission process), in exchange for offering a cut of future sales if other customers choose to buy the product? In this case, the “prosumer” isn’t actually doing much except investing money, but it’s not hard to envision it going to another level.

Has anyone seen this idea used anywhere else?

There’s a fantastic story on TechRadar today about “The Secret behind Threadless’ Success“. Like many other Web 2.0 success stories, the whole thing started as a hobby and almost accidently turned into a thriving business – with crowdsourcing shifting from something they were “unknowingly” doing to the center of their entire strategy. As co-founder Jake explained while taking a break from selling 100,000 shirts a month:

“We learned that what we were doing was called crowdsourcing about three years into the project,” Jake chuckles, “and ended up being the prime example for it. We just started Threadless as a hobby, not to be a business. Not only did we not know the business model was crowdsourcing but we didn’t know there was a business model. Today it’s the core of our business. It affects every department: the way we market, the way we do our customer service.”

But what I found most interesting from this article was his perspective on advertising – or perhaps I should say distaste for it:

“We’ve experimented with advertising pretty recently and have had mostly negative reactions to it,” Jake explains. “It’s always been something that we’ve felt is not right for us. Me and Jeffrey [Kalmikoff, Threadless' chief creative officer] used to work at four ad agencies, so we have a pretty strong understanding of what advertising means and how evil it is.” He chuckles.

“With our company it’s all about trust and honesty and we just don’t like the idea of pushing our brand on people who otherwise wouldn’t hear about it. We like the idea of it spreading via word of mouth, organically, naturally. It’s not that we don’t market, we just don’t advertise. I’d rather somebody hears about Threadless through an article in a magazine than an advertisement in a magazine.”

It’s a perspective that seems to be fairly pervasive in this space – direct advertising is some mixture of evil, inauthentic, and a waste of time. But as he notes, it’s not like they don’t market – they just don’t advertise. In other words, they like to tell their story in a genuine way, and hope the community helps them share the message – which they’ve been doing in spades. And the beauty of that model – if you have a compelling story to tell – can be mostly clearly seen when the direct marcom budget line is trending towards zero…

I’m preparing to take part in a Branding 2.0 panel on Wednesday, and for such events I like to try to come with a perspective that’s slightly different than what people expect. In turn, the short version of my position for this discussion is as follows:

Branding 2.0 is about leveraging the web 2.0 to deeply engage with a relatively small community of uniquely qualified minds and/or “prosumers” in order to co-create value propositions, as well as using it to do much better, cheaper, and targeted broadcasting to get the message (or offer) out to everyone else. Given the negative rap that the word “broadcasting” gets today this second part that is often ignored in 2.0 discussions, but it might well be the bigger opportunity.

What led to this line of thinking was simple – with the rise of the web 2.0 and social media, many people have jumped to the conclusion that it’s all about conversations, communities, and deep one-to-one (or many-to-many) engagement. While I am a believer there is a great opportunity on this front, something has always struck me as odd. If you look at a lot of the literature of community development and engagement, it’s not uncommon to see estimates of about 1% of people / consumers / prosumers actually being interested and talented enough to engage in such communities. From that base, an extraordinary amount of attention is directed towards how to create these communities and make them work – but far, far, less attention is given to how to connect with the 99% of other customers, and potential customers, that are out there. From what I’ve seen, doing so has a lot of similar properties to traditional broadcast messaging – but in a far superior way thanks to the web 2.0.

To get a little more specific, one company I’ve been watching closely is Starbucks, and I’ve done a fair bit of research around their MyStarbucksIdea site, and other similar online properties. I think it’s great, the 10,000 + ideas they’ve captured through the site are amazing, and it’s a fabulous example of getting customers engaged in the value creation process. But to put that 10,000 in perspective, Starbucks has 17,000+ retail outlets, and conducts 50,000,000 transactions a day. The percentage of customers that they directly engage via collaborative efforts like MyStarbucksIdea is extremely small, no matter how you slice it. And I don’t think that’s ever going to change.

So what should companies do about the other 99%+? Is it just a simple case of hoping word-of-mouth does it’s trick, and information trickles out from the their core base of prosumers into the broader community- in support of traditional broadcast marketing campaigns? I would argue no – and that companies need to think deeply about different ways to do “broadcast” marketing that leverages web 2.0 technologies. Again, from my experience a lot of people in social media react poorly to such statements – any mention of broadcasting is just so 1.0, and gets you kicked out of the club. But in my mind, the opportunity to re-invent broadcast marketing is a huge opportunity, and has to be approached very different than from a “conversational” social media mindset.

For example, when I worked in a Branding analytics department a few years back, we did a variety of detailed segmentation models, but one of the most useful was fairly simple – put usage on the X-axis, loyalty on the Y-axis, and the quadrant of high usage, high loyalty customers represented a large percentage of sales and profits (roughly the 80/20 rule). While I would imagine that most of the people that might engage in a community associated with our brands at the time would fall into that group, the vast majority of people there would have neither the interest or time to do so.

But what they might be interested in is engaging with the company directly – say, via something like Twitter today. And since one of our ongoing challenges was finding a way to target these select customers with messages and offers in a cost-effective way, something like Twitter could be amazing for that – free, simple, targeted. It’s not rocket science by any means – but the ability to reach interested customers with relevant information, for free, more or less whenever you want, is a remarkable development that’s not given enough attention.

Another thing to look at is finding ways to serve up ongoing value to these (and even less loyal) customers, instead of just serving them ads. Various experiments like Whole Foods and Kraft recipes are great examples – a valuable service the can open up an ongoing connection point, but isn’t necessarily about conversations or communities at all. On a similar front, instead of trying to think up how to serve ads over mobile devices like the iPhone, companies might want to focus their attention on coming up with a killer iPhone app.

There’s a lot more I can get into here, but I’ll stop it there for today. The main message is that the Web 2.0 is great, and communities are great – but you shouldn’t jump to the conclusion that this means broadcast is bad. One of the great examples of this, that I referenced earlier and went into great detail on in a recent research report, is how people and companies are actually using Twitter. While for many it’s a platform for conversations, under the surface there’s a new, better broadcasting model emerging – and I can name a huge number of popular accounts that, no matter how they might describe themselves, are basically just broadcasting information. It works, it’s powerful, and it’s a big part of the future of Branding 2.0…

I’ve been looking at a variety of potential frameworks in relation to the topic of prosumerism / customer co-creation. I linked to a couple last week, and have developed a few of my own over the past few years, but I continue to find 2 x 2s to be an interesting way to explore the issue (and many issues for that matter). In turn, I’ve been playing around with a couple that I’ll be writing about over the next few weeks. Here’s one of them (some of them might have to be moved around a bit, but I think you’ll get the idea…):

The X-axis looks at what the prosumer engagement focus is on – wisdom of crowds vs. uniquely qualified minds. Regular readers of this blog will notice I bring this topic up a lot, because I think it’s very important. In some cases, companies are looking to engage a large community of people, and it is the collective action of the group that creates value; in others, companies are looking to connect with a particularly uniquely qualified mind to deal with a certain problem. “Preferred” member communities – i.e. a select group of customers that companies engage with to help develop the value proposition – fall somewhere in between.

The Y-axis builds off of the OMC report referenced last week – is the “locus of value creation” prosumer driven, or company driven? For example, the value on Digg is almost entirely created by the activity of prosumers on the site; if you look at something like the “Innovative with Kraft” program, the company is looking for ideas that they can use to create value (i.e. new products). These seem like two very different things to me.

Next in this series: X-axis the same, Y-axis focused on incentives (intangible vs. financial).

I’m currently prepping for a presentation on Prosumerism to be delivered in May, which means I’m knee-deep in various frameworks related to the topic. Below are the two I’m focused on right now – the first from OMC Group Insight, and the second from Gary Hayes. Not much to say about them yet, but I think both are very helpful in trying to articulate what’s going on in the prosumer / co-creation space.

1. Eight Styles of Firm Co-Creation (From OMC Group Insight).

2. The Myth of Web 2.0 Non-Participation (From Gary Hayes).

Similar to the Intel logo thing, there’s another graphic I like to use to get people thinking about what prosumerism really means – a bit of a play on one of the more famous political speeches of all time:

Think about how dramatic of a mind-shift that could be for many companies – instead of solely focusing on being a producer / creator of value for others to consume, you become a platform that enables customers to create value for each other. There’s lots of interesting examples of this is the Web 2.0 space, but the idea also plays very well in the “real” world…

The ideas around prosumerism – particularly around customer co-creation – appear to be becoming ever more popular with companies, even if the term itself isn’t widely used. In addition to the Dilbert example I like to open presentations with (and part II of that series is coming soon), there’s another graphic I like to use that seems to resonate well with people. It’s a riff on the Intel Logo most people are familiar with:

Now of course we are not suggesting that companies adopt this approach entirely – having only customers inside, and only talent outside, makes absolutely no sense. However, I find it useful for discussions because over the last decade or so many companies have become quite comfortable with the “Talent on the Outside” portion, via strategies like outsourcing, the use of ideagoras, etc. However, from my experience while lots of companies talk about things like “customer engagement”, they generally haven’t really thought through what “Customer on the Inside” really means for them. Is it simply about getting feedback? Word-of-mouth advertising? Integrating customers in the innovation process? What about testing (i.e. beta launches), or strategies built around customization and true co-creation?

There are a lot of different opportunities that companies can consider and pursue, depending on what there strategy is, when they start thinking about bringing the “Customer Inside”. And similar to how Intel did a brilliant job de-commoditizing themselves by having PC purchasers know that there is Intel inside, many companies may find they can similarly differentiate the experiences they offer by adopting some “Customer Inside” strategies.