Meatball Mondae #4–No middlemen, no insulation

Perhaps the biggest change the new marketing brings is the easiest to overlook, mostly because it’s so obvious.

Every organization now has the ability (and probably the responsibility) to deal directly with the world. With customers, with prospects and with those impacted by their actions. No middlemen.

The president of the bank isn’t used to hearing from a customer about to lose her house. A retailer in Tucson isn’t used to hearing from a potential customer in Nebraska. A rock star is used to being entertained by A&R guys, not by maintaining a permission list of 100,000 customers and 55,000 MySpace friends.

This direct connection is an asset or a risk, depending on how you look at it.

The asset (the only asset, pretty much) that can be built online is permission. The privilege of marketing to people who want to be marketed to. This asset is big enough and valuable enough to build an entire business around (witness Scott Adams and Amazon) and it upsets traditional power structures in just about every industry.

More important, it leads to the idea of "no insulation."

Sonos makes a device that would have been inconceivable only ten years ago. The Sonos system is a remote control (with an LCD screen), a hard drive, and a box. The box hooks up to your stereo speakers, and the hard drive holds all your MP3 files. You can use the remote to review your entire music collection and play it anywhere in your house. Add more boxes, add more rooms. One hard drive can be used to let your daughter play Mahler in her room while you listen to Coldplay in the kitchen.

While the idea is simple, and installation is a snap, the products Sonos replaces weren’t simple or easy. As a result, multi-room speaker systems were sold by consultants—the sort of private services that cater to multimillionaires and their homes. At a recent CEDIA Show (the conference for installers), one of the categories was “Best Installation over £100,000.”

If you were in that business (companies like Runco and Stewart Filmscreen), you catered to the CEDIA installers. You let them be the middlemen, the service and support people, the installers, and yes, the folks that made most of the profit. The installers guided many of the decisions that their clients made, and you were at their mercy.

Sonos sells a product for about a thousand dollars. That’s less than the gratuity on most custom installations. As a result, Sonos decided to use the Web to allow consumers to interact with them directly.

In addition to a well-designed discussion board, Sonos invested in motivated, well-trained online staff members, who are seemingly everywhere, answering questions within a few minutes of them being asked. Sonos has pleasant technicians answering the phone on weekends. They not only publish their email address, but actually answer queries (and helpfully) in a matter of hours.

Of course, Sonos is still happy to work with the CEDIA crowd. But by embracing the ideas of accessibility and speed, they have made their product appealing to people who could easily afford to spend ten times as much.

How will their competition catch up? How can their competition simultaneously jettison their entire sales force, dramatically increase the quality of their customer service, lower their end pricing by 70%, and make the product consumer friendly? They can’t.

When everyone was playing by the same rules, when all suppliers relied on insulation in order to maintain margins and keep throughput efficient, it was a terrific system. But as soon as one player in the industry can use a direct connection to the end consumer, the rules change for everyone.

[Find out more
about this series. Here’s last week’s installment. Here’s a comment from last week. And here’s one more.]