Christopher Carfi

(Note: More background on VRM here.)

Been doing a lot of thinking about VRM (Vendor Relationship Management) in anticipation of this week’s developer’s meeting. It’s a potentially expansive, and extremely undefined, area.

One particular tactic I’ve found useful when dealing with uncertainty is scenario planning. There are many different implementations of scenario planning; the one I use is a modified version of the one described here and originally pioneered by Peter Schwartz at GBN.

So, the two big questions:

• Q1: Who controls the interactions between vendor and customer?
• Q2: Are the interactions focused on transactions or relationships?

This gives us a universe as follows:

It’s important to note that the object of this exercise is most emphatically NOT to “predict” which of these four areas will “win.” Instead, it’s to draw a vivid caricature of each world, and determine its key traits. Doing this allows us to better plan for, and recognize, instances of that particular scenario when we run across it in the future.

“Minority Report”
Vendors bring every resource to bear to extract the last bit of margin out of every customer. Targeted ads, served relentlessly and based on our past purchasing behavior, attempt to entice us to consume the next new thing. Friedman’s “Flat World” observation plays out to its logical conclusion, with manufacturing and marketing, sales and service taking place at whatever patch on the globe can deliver the product most cost-effectively. Since vendors use data mining of petabytes of customer data in order to predict the next hot trend, post-sale service becomes increasingly unimportant, since product lifecycles are measured in weeks. Customer data becomes a pure commodity, created, owned and traded by vendors in the way that carbon credits and pork bellies are traded today. Vendors with economies of scale rule the day. Customers get low prices, and limited choice.

“Me-Ville”
Cryptography, identity management and business processes have all converged, enabling customers to shop securely both online and off. Customers issue anonymous “personal requests” for goods and services, and vendors battle each other relentlessly in order to be selected. Prices are driven to just above cost for commodity items, and a cadre of flexible, “long tail” suppliers emerge to meet the non-commodity requests. eBay stumbles, and then launches a service that is the converse of its current offering. Reputation systems abound for both customers and vendors, leading to the creation of RepTorrent, an anonymous network for the trading of gray-market reputation identities.

“The Global Village”
The customer owns her own information, and does with it what she pleases. In some cases, anonymous transactions are conducted, but most interactions happen with trusted vendors with whom the customer has dealt over time. The customer chooses vendors based on interpersonal empathy and affinity, as well as technical capability. Relationships grow over time, and vendors evolve beyond being simple suppliers of goods and services and into confidants (and sometimes friends). Customers pay somewhat higher prices, but look at interactions with vendors holistically, feeling that price is only one aspect of the true cost of a good or service. Customers and vendors work together to come up with new products and services. Competent and personable vendors succeed, scam artists are quickly outed and ostracized. The same is true for customers, as both vendors and customers belong to interconnected offline and online communities.

“The Matrix (Blue Pill)”
Vendors control production, allocation and distribution, and at the same time understand that a connected customer is a lifetime customer. Supply chain models such as vendor managed inventory and consignments are used. The vendor controls what purchase options are given to the customer, and realizes that he must be equitable, or the customer will terminate the relationship. The vendor has perfect information on the behavior of his customers, including purchase history. Vendors use this information to continually refine and model the selection and quantity of goods and services made available to each customer not only to maximize profits, but also to ensure continued access to that customer. Customers select their vendors based on the belief that they will have an ongoing relationship with the vendors they choose, and give them feedback as to what they’d like to see.

So. These are just first thoughts. Would love to work on this together, both here in the comments and here on the wiki.

marrakech market: malyousif