OVERVIEW
The core of Vendor Relationship Management (VRM), in all its incarnations, is a respectful relationship between vendors and customers. VRM is not anti-vendor: at most, it is anti-business-as-usual.

While engaging in VRM does mean that vendors must do without some “rights” that are currently taken for granted, and their associated practices, VRM also requires that customers actively engage in the relationship, taking on the responsibility for communicating to vendors in a way that they can easily understand.

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A vendor/customer relationship based on today’s CRM places far too much weight on each party “reading” the gestures—the implicit statements and questions—made by the other, leaving little or no room for explicit communication. CRM “relationships” are like a newly-married couple that never speak to one another, relying entirely on body language and facial expressions, mood and gesture, to interpret one another’s behavior.

These non-verbal layers enhance communication, and help to create a rich, textured relationship, but without a foundation of clear, open, and explicit communication, these readings of the other party are guesses.

Each guess about what the other partner wants or needs from the relationship leads to another guess: do they like what I’ve done, or not? Would the other idea that I had have been better received? A model of the other partner is built, layer upon layer, and each party is engaging with the model of their partner, not with the actual person.
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VENDOR PERSPECTIVE
The benefits of VRM vary depending on what role one is playing in a relationship, and the goals of that relationship, but there are common threads. From a vendor’s perspective, each individual that they engage with is made up of more data points than the vendor could possibly hope to collect and interpret, and that’s a margin-eating problem; where CRM almost requires that the vendor’s “relationship” is with an impressionistic (and often out-of-date) thumbnail sketch of a person (as in the metaphor section above), VRM allows the vendor to engage with the actual person. The seeker and vendor agree to treat one another with respect, and (we hope) that allows them to be more open with one another.

Two other notes on the vendor’s perspective on VRM:

Many companies have entire divisions dedicated to purchasing. The idea that finding and acquiring what you need as efficiently as possible, taking advantage of your existing relationships, is one that’s immediately comprehensible to vendors. The existing language, models, and tools of corporate purchasing may be useful for informing VRM development and also for conveying the importance and benefits of VRM to vendors.

In addition, presenting VRM to vendors as a “framework” or “API” may be advantageous. Many vendors understand CRM as an umbrella term that encompasses many different implementations; we should make it clear that VRM is an analagous umbrella, providing ways to engage with current or potential consumers in a more effective way.

SEEKER PERSPECTIVE
From a “seeker” perspective, the problem seems a little more straightforward: you can never get back the two days that you spend figuring out which cell phone you want to buy and who to buy it from. If VRM can help you quickly and easily figure out what you want and communicate those needs/desires to the people who can fulfill them, VRM offers a real, immediate benefit.

Much of our behavior as customers is defensive: we ask our friends’ opinions, we search the Web for unbiased reviews, we compare vendors’ prices online, use disposable email addresses or fake profiles to get access to vendors’ special offers…because we see vendors’ interests as opposed to our own, much of our relationship with vendors comes down to simply trying to avoid getting screwed.

REPUTATION AND TRUST
While VRM is fundamentally about one-to-one relationships, it requires a superstructure of reputation in order to work well. What is the reputation of the vendor, customer, or prospect that I’m engaging with? What do the people (or vendors) that I trust think about them?

The importance of reputation and trust points to another key VRM issue: the reputation/trust concerns for any VRM data storehouse. In some VRM implementations a central data repository is likely to be necessary (or at least very desirable). Under what circumstances will it seem appealing and worthwhile to people to share data with a third party? To put it another way, is a big storehouse (vendor-neutral VRM data store) actually better than many little silos (vendor-specific CRM) if you still don’t trust the landlord? What can the landlord do to earn people’s trust?

With the end of WNYC’s latest pledge drive today, I’ve got VRM and NPR on the brain (even more so than usual), so I’m passing along the text of a note that I sent to the Project VRM mailing list a few months ago.

One of the issues that we’re very likely to hit with many VRM initiatives is the chicken/egg problem on adoption: vendors aren’t likely to devote resources to implementation until there’s a clear critical mass of demand, and customers aren’t likely to devote their own resources until they’re getting a clear return on the time and effort required to actively participate in a VRM-style relationship.

This isn’t something that we need to address immediately, and there are a variety of ways to work with the problem, but it got me thinking about the exceptions to this rule…so I’ll toss out the idea that public broadcasting is right now an example of a vendor that’s trying to implement VRM but failing for lack of adequate tools (and probably lack of a clear understanding of the issues involved).

The language and ideology of public broadcasting is already relationship focused. You don’t “buy” or “license” access to public broadcasting, but rather “become a member.” All stations that receive funding from the Corporation for Public Broadcasting are required to (among other things) hold open meetings and maintain a Community Advisory Board, requirements that are intended to keep public broadcasters engaged with (i.e. in a relationship with) their “customer” communities at a level beyond simple, transactional financial support.

The difficulty seems to be determining what the vendor<->customer should be after the pledge drive is over, and—only after that question is answered—figuring out how to facilitate that relationship.

I’ve been a member of WNYC since my return to New York City seven years ago. We don’t necessarily give a huge amount of money, but at least once a year we provide some financial support. But what else? I know that there are other “membership benefits,” and also that I could volunteer to man a table at an event or something, but I’m not sure that cumulative transaction count really ends up making a relationship.

From the VRM perspective, I’d like to know what both WNYC and I can do to build on the specific, unique relationship that we already have. Right now, WNYC knows enough about me to bill my credit card and (I assume) knows my contribution history. Not much to build a relationship on. In my case I’d be happy to provide more information to WNYC if that would help them figure out what else we could do together, and I suspect that there are a fair number of other people who would do the same.

Hence our starting question: beyond listening to things that I enjoy (me) and receiving financial support (WNYC), what do we both want from this relationship?

I know what he means — I blogged about the very same positive experience with Amazon’s recommendations a couple of years ago, shortly after noting the inverse experience with eBay’s sad little attempts to send personalized email to me.

While I, like Kim, am still pretty happy with Amazon and continue to view their recommendations as useful (and not spam), my thinking about VRM has taken some of the luster off of this relationship with Amazon.

The problem isn’t anything that Amazon is doing — what they offer is already far better that what most of the market is doing; the problem is that my expectations have grown while Amazon’s capabilities appear to be fundamentally the same as they were two years ago. You see, I’d like to offer Amazon the chance to have an actual relationship with me, rather than a relationship with the incomplete model of me that they’ve built from the transactions that we have in common (I call that construction “Whit: Amazon Virtual Edition”).

Just taking the easy examples, real-world Whit leaves trails of data across the Internet that I’d be happy to share with Amazon, just to see what they could do with them. (With the explicit understanding that both the data and the decision whether or not to continue sharing it is mine, of course.)

• I get at least five or six DVDs per month from Netflix, and tend to rate them after viewing. Amazon knows only that I don’t buy DVDs often at all. No recommendations for me, no opportunity to prey on my secret desire to own every episode of The Tick for Amazon.
• While I buy a reasonable number of books through Amazon, the overwhelming majority of my book purchases are from Powells. Amazon knows nothing about them. No recommendations for me, and no opportunity to take business away from Powells for Amazon.
• I buy some music from Amazon, but not a huge amount. last.fm doesn’t know what I’ve bought, but it knows all about what I’ve been listening to. Amazon knows nothing about it. No recommendations for me, and no chance to take business away from eMusic, Apple, CD Baby, and a host of others for Amazon.

Now I know that I could work around this to some extent by using Amazon’s lists, wishlists, and what-have-you, but why should I? I’ve already created all of this information in a variety of places, why can’t I just use that information now, to make my own life easier? And if that means that Amazon gets the chance to make more money by knowing me better, where’s the harm? Isn’t that scenario better for everyone involved?

I know that this isn’t just Amazon’s problem: even if they make it possible for me to put data in, everyone else that I’ve mentioned needs to make it possible for me to get data out. But that’s the way I want these relationships to work. All this metadata I’m creating is mine. I should be able to actively and selectively share it with others. I should be able to offer vendors data that they can’t collect themselves, so that they can build a relationship with me, rather than a relationship with their transaction database.

And that right there is the “R” for one big piece of VRM.

While I’ve been off the grid for the whole week, I have had a few minutes here and there to think, and since very few of you read this seeking insight about my home life I’ll pass along a few of those thoughts.

I realized that I’m really enjoying my VRM honeymoon. You see, I started thinking about what Doc Searls now calls “vendor relationship management” a couple of years ago, after Doc posted some first thoughts on the topic. I can’t say that it’s been top of mind for me during that whole time, but it’s refused to go away. Then, a month or so ago, Doc kicked off ProjectVRM and I suddenly had a place to dump all stuff that’s been rolling around my head, to read more about what others are thinking, and start collaborating. And that makes for a pretty nice honeymoon.

You see, there will come a time when my backlog of thinking will no longer be sufficient to keep me making progress, and I’ll have to deal with time conflicts between VRM and everything else in my life. There will come a time when the groups working on VRM decide to go in a direction that irritates me, or feels inconsistent with my beliefs about or structural vision of VRM — though that direction may well be right.

There will come a time, in short, when the raw pleasure of sorting through an interesting and challenging problem will be mixed with the inevitable work required to create anything of value — sometimes frustrating, occasionally tedious, often difficult work.

As with the end of any honeymoon, what comes of that frustrating, tedious, difficult work will likely be even better than the honeymoon itself, and I’m even looking forward to it in a masochistic sort of way, but…well, it’s still nice to have the honeymoon, you know?

This is something that he and others, including me, have been thinking about for a while. Back in 2004, when Doc was looking for a minidisc transcribing machine, I made a few notes on the topic, which seem even more intelligent and insightful when I fix the typos and structural/grammatical weirdnesses:

Seems like there are two issues here, and advertising is the secondary one. The primary purpose of advertising is to enlighten people about all the wonderful products and services that they don’t yet know they need. That advertising may be caught by someone who happens to have a specific, personal need that dovetails with a particular ad, but that’s generally a happy coincidence. Avertisers place their ads (online or off) where they expect to reach people who could need what is being offered, because the could need market is waaaay bigger than the do need market.

What Doc is primarily concerned with is something that doesn’t yet exist, and I don’t think it’s “advertising,” exactly. The closest equivalent to what he’s talking about is actually product comparison Web sites: you already know what you want, so you go to the site and are presented with a list of links to the places that have what you want, with a little information about each vendor [and perhaps some alternatives that you may not have known about].

You could take Doc’s idea in some interesting directions; what’s most interesting, though, is that the hardest part of such a system isn’t the tech but rather the psychology. How do people want to use such a tool, even if they’re motivated enough to use it at all? Do they want, like Doc, the ability to “actively but selectively” tell people about very specific product needs, or do they want to say “I’m looking for a digital camera” and let the vendors work off of that? What does “selectively” mean in a context like this, anyway? How do you, the user, decide who should have access to the information that you’re publishing, and control that distribution process?

Now that it’s 2006 and I’m all 2.0, microformats immediately come to mind as I read what’s been discussed over the last day or so. From a microcontent point of view, I’d work with a tool that allows me to create a little datachunk that defines what I’m looking for, vendors create their own little datachunks that define what they’ve got available, and a clever little system sits in the middle connecting the two and managing the whos and whys of contact.

There are a lot of possible ways this could be implemented (public vs. private system, mechanisms for managing which vendors and seekers can connect, contact mechanisms in both directions, and a dozen variations and refinements pop to mind immediately), but they all share a couple of characteristics: they’re not “advertising” in the way that we normally think about it today, nor are they a replacement for advertising as we normally think about it today.

At the crudest level, this model is very different simply because it’s -catch based, rather than -cast based. Broadcast begat “narrowcast,” but both start with a vendor deciding that it’s time for them to reach out and touch someone. The VRM approach (or “monocatch,” if you will) is driven by an individual, on their own schedule, making it known that they are interested in something.

While I stand by my statement that defining how this approach can actually solve some advertising-related problems is the big open issue, I’ll note that there are interesting technological questions in there as well: how do you manage the relationships involved to keep VRM from becoming just another marketing-department-schedule-driven ad vehicle? How do you classify all the request and offer datachunks so that people aren’t getting offered microcassette transcribing machines or minidisc players when they’re looking for a minidisc transcribing machine — while still making it easy for someone to say that they’re interested in any of the above (but not minidisc recorders)?

There’s a lot to be done here, but maybe the time really has come to start working on a supplement to our old, familiar advertising.

He believes that “[w]hen the revolution is over, the only kind of advertising that survives will be the kind customers want. And when it comes, it will bear zero resemblance to the advertising we’ve known and hated for the last hundred years,” also noting that RSS is one avenue that may be leading in the right direction: “I’m in the market for lots of other stuff too. So are all of us. What can we do to communicate that demand, actively but selectively? I believe RSS is a necessary but insufficient answer to that question. And that there’s money to be made in making up the difference.”

Seems like there are two issues here, and advertising is the secondary one: the primary purpose of advertising is to enlighten people about all the wonderful products and services that they don’t yet know they need. That advertising may be caught by someone who happens to have a specific, personal need that dovetails with a particular ad, but that’s generally a happy conincidence. Avertisers place their ads (online or off) where they believe they have good odds of finding people who could need what is being offered, because the could need market is waaaay bigger than the do need market.

What Doc is primarily concerned with is something that doesn’t yet exist, and I don’t think is “advertising,” exactly. The closest equivalent to what he’s talking about it actually product comparison Web sites: you already know what you want, so you go to the site and are presented with a list of links to the places that have what you want, with a little information about each vendor.

You could take Doc’s idea in some interesting directions; what’s most interesting, though, is that the hardest part of such a system isn’t the tech but rather the psychology. How do people want to use such a tool, even if they’re motivated enough to use it at all? Do they want, like Doc, the ability to “actively but selectively” tell people about very specific product needs, or do they want to say “I’m looking for a digital camera” and let the vendors work off of that? What does “selectively” mean in a context like this, anyway? How do you, the user, decide who should have access to the information that you’re publishing, and control that distribution process?

Hmmm…this pretty clearly feeds into some “when search? when sort?” thoughts I’ve been bouncing around for the last few months…I’ll go further into all of this in the next couple of days, but right now I’ve got to head to Coney Island in time to catch the hot dog eating contest. Pictures available tomorrow, I hope!