Marketers seduce consumers usually with positive triggers: new, renewed, better, unique. ‘More features for less money’. Attempts to persuade consumers to buy products or services seldom occurs sending out opposite, negative messages. An exception is the (in)famous Hans Brinker Hostel in the Dutch capital Amsterdam which differentiates itself successfully advertising with messages like ‘proudly disappointing travellers for forty years’ and ‘if all mediocre, cheap places are fully booked: consider us!’ Believe it or not, the hostel flourishes. But usually, negative messages which try to convince customers to make more purchases seem to stay limited to obscure Goth festivals and daring young tourists in the Dutch capital.
Yet, the Dutch seem to participate in another successful persuasion strategy which includes messages which are not completely positive. I call it the ‘Ultimate Transparency Strategy’. This strategy includes showing bad events, errors, risks and doubts about continuity to the audience, possibly exposing the company to criticism and public humiliation, since public opinion can follow unpredictable routes.
The first case in this trend that I’ll discuss is American. Air BnB, the successful online P2P location exchange facilitator, was hit hard by a case in which a house of one of its customers was completely ransacked by a visitor. The example went all over the internet and dramatically displayed the flaws in the AirBnB model. Turnover dropped sharply and AirBnB responded defensive initially, doing exactly the wrong thing according to many PR experts. The incident brought the thriving company on its knees in just a few weeks. Then they changed their strategy, offering complete transparency about what had happened and about their mistakes. They paid out the victim, dialogued openly with their customers about solutions and found an insurance product which brought back the customers. Ultimate Transparancy saved the day for AirBnB.
Droam, a small Dutch start-up renting out mifi-devices (create a personal hotspot when traveling, saving money and allowing for peace of mind connectivity (very handy in the above mentioned hostel)) recently improved the Ultimate Transparency Strategy. The Gordon Ramsey-like CEO already had already built a reputation of delivering straight in-your-face comments through Twitter and his foodie blog, but when Droam recently got into financial trouble, he extended this with a campaign unheard of in European Internet history.
The firm ran out of working capital due to a risky business model allowing customers to make costly mistakes and some of those customers not paying their bills after discovering multi-thousand euro disaster invoices. Liquidity was running out quickly for the fragile start-up, operators wanted their bills to be paid and Droam seemed to go down the drain in just a few days. The response of Philip Actor (@attore) was to post every detail of his misery on Twitter and ask people for help to solve the situation. He didn’t do that by going on his knees, but stayed consistent in his mix of sharing all intimate details of the company and his state of being and at the same time conveying ruthless negative comments about anybody not agreeing with his approach. Minute-by-minute, his Twitter followers could see the company getting into deeper financial trouble. Actor not only shared the company’s financial details, but his personal emotions and heavily opinionated views on individual customers, partners and competitors in a dramatic 48 hour long session in which he discussed, begged, demanded, cursed and thought out loud on how to solve the problem at hand. The audience could see the solution getting closer… and then slip away again. Critics stood up blaming the issues to bad management, all opposed by Actor showing each detail of the comments and his defense to whomever wanted to read and listen. Important detail was that Droam encouraged people to put money in a small company that was about to go bankrupt, and not for a single moment hid that there was a significant risk that people would lose their pledge the next day.
To make a long story short: Droam made it so far. The ‘Ultimate Transparency Strategy’ which Actor followed created trust and empathy so many customers pre-ordered devices. Enough for a larger investor to step in to keep Droam alive. The very high risk on losing money did not win from the trust in the message and beliefs that Actor managed to communicate to his followers. A large group proved to be true followers and created accumulated power of the type which fuels crowd funding projects into success, but this time it took Droam from the cliffs edges, fueled by ultimate transparency.
Will this strategy work for less dramatic situations? Can it be ‘used’ as a robust persuasion strategy by companies?
I think the ‘Ultimate Transparency Strategy’ can form part of the DNA of a company and therefore it can be part of an effective strategy. However, it seems ineffective for companies choosing for this strategy whenever it seems appropriate, since ‘Ultimate Transparency’ does not work if used without continuous transparency. The AirBnB and Droam cases provide enough material for companies to increase their awareness that transparency can persuade customers in a compelling way, allowing for successful strategies.
Do I get the money back that I have put in Droam? Do I trust it to function sustainable enough to increase its working capital towards healthy levels again? We’ll see, but at least I know where it went and how it was used, unlike some other money I lost in the last 4 years of crisis.