Be Afraid. Be Very Afraid...Oh, Never Mind

The 2010 American Customer Satisfaction Index E-Business Report is out. The report is the product of the research firm ForeSee Results. The research firm uses data provided by the University of Michigan. Analysts argue that the report should sound an alarm for Google and Facebook, two of the web’s most popular sites. Apparently, the companies are not doing as good a job as they have in the past with privacy policies and ease of use of their web sites. The report’s scores are set so that a score under 70 is considered poor. Facebook gets a rating of 64, despite the fact that it is the largest and fastest growing social networking service in the U.S. Google gets a rating of 80. This rating is down from 86 a year ago. What are we to make of this?
Not much.

If you went out today and purchased an automobile that had the styling, operating capabilities and characteristics of an automobile from 1960, you would be severely disappointed. You would compare that car to today’s car and find the older car sorely lacking. How, then, did anyone sell a car in 1960? They sold cars in 1960 because they didn’t have the automobiles of 2010 to compete with those cars. The relevant comparison is not an absolute measure. It is only a relative measure. We have to view Facebook and Google against their competition, not against an absolute standard. (See “Video #70: Overview of Products and Services Part 2: What to Expect” on StrategyStreet.com.)

When you look at these two companies against their closest competitors, they come out rather well. Facebook’s “dismal” 64 rating compares with its nearest rival, MySpace, with its rating of 63. Google’s “falling” rating of 80 compares with Microsoft’s Bing at 77 and Yahoo at 76. The sky is not falling. (See the Perspective, “How Customers Buy” on StrategyStreet.com.)

In any competitive market, the standard is not absolute performance, but relative performance. If a company’s relative performance begins to fall, it will lose market share and you can expect falling quality rankings to account for much of the market share loss. An absolute standard is meaningless. Perfection of performance has a cost well beyond what the vast majority of customers would be willing to pay.

New Product in a Fast Growing Industry: Bing

After failing more than once to create an innovative and attractive search product, the persistent Microsoft is back with a new entry called Bing. Let’s use the Customer Buying Hierarchy to evaluate the prospect for the Bing’s success.

The Customer Buying Hierarchy (see “Video 27: Full Description of How the Customer Buying Hierarchy Works” on StrategyStreet.com) holds that customers buy a product using four categories of evaluation: Function, Reliability, Convenience and Price. Function (see “Video 13: Definition of Function” on StrategyStreet.com) refers to the features of the product that affect how it is used. Reliability (see “Video 14: Definition of Reliability” on StrategyStreet.com) refers to the benefits of the product that assure the customer that it works and will continue to work. Convenience (see “Video 15: Definition of Convenience” on StrategyStreet.com) refers to the ease with which the customer may find and purchase the product. Price is the cash cost the customer pays for the product.

We will begin with a look at Function differences. The search industry has two customers: The consumer searcher and the advertiser. This new Microsoft entry is drawing some good reviews for consumers and some wait-and-see opinions from advertisers. Bing offers some new Function innovations that reviewers prefer to Google’s search results. It appears that the consumer will find Bing an improvement on Google. The advertisers, however, are adopting a wait-and-see attitude. Google’s market share, at over 60% of the current search market, is massively larger than is Bing or its Microsoft predecessor. Even Yahoo Search is much larger than is Microsoft in the market. Many of these advertisers plan to wait to see whether Bing will become the new Google.

The Reliability and the Convenience advantages in this market belong solely to Google. The company name has become a verb describing a search. Most people know about the Google product and believe it to be the market leader. A large percentage of desk top and lap top computers have the Google toolbar with its search box resident on their computers. Google is an easy default choice for most searchers.

So, what is the outlook for Bing? The success of Bing largely depends on what Google does to respond to the Function advantages Bing is bringing to the market. This is still a fast-growing market. This works in Bing’s favor. Consumers are likely to be willing to try something new if they think it might help. Switching to Bing from Google or Yahoo offers little difficultly. Microsoft has the cash to put on quite a marketing blitz. All of these Convenience factors work in Bing’s favor. However, Microsoft has to rely on the forbearance of competitors in order to win in this marketplace. It has to maintain its unique Functions in order to best Google in a world Google dominates. (See the Perspective, “When to Compete on Features” on StrategyStreet.com.) If Google copies Bing’s new Functions, Bing will lose its advantage and will not succeed. The Reliability and Convenience advantages that Google enjoys today give it time to copy Bing’s Function advantages without losing much of its current market share.

If Google neutralizes Microsoft’s Function advantages soon, Bing will bring only modest market share changes.