In 1995 Michael Treacy and Fred Wiersema released a book called The Discipline of Market Leaders. In a nutshell, they stated that there are three value disciplines and companies must choose one in which to excel. The three areas are:
- Operational Excellence (eg. FedEx or Wal-Mart)
- Product Innovation (eg. Intel)
- Customer Intimacy (eg. Four Seasons)
The Customer Intimacy discipline provides a highly customized level of service. Since this is often expensive to provide, it creates a price premium and is generally offered to a small number of customers.
However, with sufficient data, some companies are able to provide a high level of customization to a large number of customers. My favourite example is Amazon, whose book recommendation engine knows my reading preferences inside and out and can alert me to book releases or sales that are perfectly aligned to my preferences.
Foursquare is now aiming to do the same thing. On the company blog, they announced that the list of nearby “Places” will be customized based on each user’s habits. This will be driven by the vast amounts of data that Foursquare has collected from its hundreds of thousands of users. Not only will their algorithms take into account the places you have ‘checked in’ to, but will analyze the existing popularity of different venues, as well as other factors like the time of day.
The result, if the algorithm works as planned, will be a user experience that is tailored to each individual user. Done properly, this is an extremely powerful brand proposition and can produce excellent loyalty among consumers. And unlike most Customer Intimate businesses, when powered by data it becomes extremely scalable. In fact, the more users on Foursquare, the more powerful their recommendation engine will become as they will be able to collect more data. This is much more efficient than a hotel or retail store that has to hire enough sales staff to give each customer an equally customized experience.
What do you think? Is Customer Intimacy the right discipline for Foursquare?