Farewell to Fido: A Lesson in Digital Customer Relationship ManagementPublished: January 30, 2013 in Knowledge@Wharton
When Zynga recently pulled the plug on an underperforming online game called Petville, the outcry from its virtual-pet owners was loud and visceral.
"This is the last day my little friend will be alive. So sad," a player wrote in one of more than 2,300 posts on Zynga's Facebook page announcing the game's closing. "I love my little friend." Another fumed: "Zynga [stinks]! And I will NEVER play any of your games again. You can take your lousy credits and shove them! I hope ... karma comes around to get you and you think back on how many people you upset and lost due to [the] stupid, greedy decision to remove Petville."
Companies often need to shutter unprofitable businesses, but was there another approach that Zynga could have taken? Consider how Glitch, another massive multiplayer online game, or MMO, handled its exit at the end of 2012. Games publisher Tiny Speck, founded by Flickr co-founder Stewart Butterfield, said it decided to close down its flagship game in part because it "has not attracted an audience large enough to sustain itself and ... it seems unlikely that it ever would."
The company apologized profusely for its action and announced the end weeks in advance to give players time to mourn the loss of their digital avatars in Glitch's whimsical world. It also let each of the 11 giant characters in the game say goodbye while the "forehorsemen" of the Apocalypse acted as town criers, announcing that the "end is nigh," among other farewell rites. If they wished, players could download images of their characters to save them on their computers.
The effect, according to Glitch player Andrea Phillips, was to give the fans a sense of closure. She was sad the game ended, but harbors no ill feelings. "It was a very special community. It wasn't something that came along every day," she notes. "I more than got my money's worth."
But Phillips, a freelance game designer, has harsh words for Zynga, whose Farmville game she has played before. "They don't value the experience, but only the revenue. Zynga is a ruthlessly commercial entity," says Phillips. "Glitch was not that. It was a labor of love for the team that made it."
In a December 2011 profile in VentureBeat, Zynga was described as a "metric-driven" company that combined intuition and data. It religiously monitored what succeeded and failed in its games, then moved to adapt. But CEO Mark Pincus spared no sentiment for failing games, according to the article. "If a game didn't take off, Pincus had no qualms about killing it. He spent $3 million developing an unnamed role-playing game. But the title didn't take off in a viral way when it launched, so Pincus pulled the plug on it," the trade publication said. "Pincus became ruthless about canceling games that weren't working."
Zynga, ironically named after Pincus's late bulldog, euthanized Petville on December 30 as part of plans to decommission 13 underperforming games. Zynga, whose shares have fallen by three-quarters from its December 2011 IPO price of $10, said revenue growth is slowing. A change in the policies at Facebook -- the platform used to play most of Zynga's games -- has made them less visible on the social media network and also promotes Zynga's rivals, according to a November 15 story in The Wall Street Journal. Moreover, Zynga has had difficulties translating its online games to the smaller mobile screen.
The Zynga Way or the Glitch Way?
Why shouldn't Zynga cancel games that have not gained traction, much like Procter & Gamble would pull a tepidly received product off the market? It can, Wharton experts say, but the repercussions are likely to be magnified because Petville is different from a bottle of shampoo. While there will undoubtedly be shoppers who will lament the loss of their favorite hair care product, players in online games who build homes, nurture digital characters and become part of a virtual community are more emotionally invested.
Indeed, it is hard to imagine that consumers would express the same level of anger felt by Petville players against Procter & Gamble if it ever decided, for example, to discontinue Pantene. And in the age of instant feedback through social media, such disgruntlement is loudly and quickly disseminated -- denting a company's reputation.
"The world is simulated, but the emotions are quite real," says Kendall Whitehouse, technology and media editor at Knowledge@Wharton. "While you may need to close the service, do you do irreparable damage to your company by being too cavalier about not responding appropriately to the emotional investment people have in these products?"
To be sure, TV shows kill off characters all the time and book series do retire some beloved characters, such as when Sir Arthur Conan Doyle attempted to kill off Sherlock Holmes by having him plunge to his death over Reichenbach Falls. But Whitehouse argues that people's attachment to their virtual pets can run even deeper than their love of literary characters. "You didn't raise Sherlock Holmes from a young boy, but you may have raised your virtual pet from a pup," he notes. Nevertheless, fan outrage over Holmes's death forced the author to bring the detective back to life a decade later.
Businesses that do not know the difference may pay for it in the long run. For example, disgruntled Petville players who were given credits to play other Zynga offerings could transfer their ill will to another of the company's games, says Andrea Matwyshyn, Wharton professor of legal studies and business ethics. Thus, the negative feelings associated with Petville do not end with the game's demise but can live on virally.
So it may be a good idea for a digital pet game that is ending to have a "day of mourning or pet graveyard site" for players. "That demonstrates sensitivity," Matwyshyn notes. "It's a way to minimize goodwill loss."
Digital Dollars Disappear
There is another complication: Players often are not just emotionally connected to the digital communities they created; they are monetarily invested as well.
Online games typically let players join for free, but then make money through in-app purchases. At Petville, players could buy outfits for their pets and make other purchases using credits they earned or bought with real money. When Zynga shut down the game, it offered "bonus packages" to Petville players for its other games. Glitch offered refunds to people who made purchases, but added the option of giving the money to charity or letting the company keep it.
Unlike goods purchased at a retail store that has physical dimensions, products bought in the virtual world exist only as bits and bytes and literally disappear when the game is terminated. "One day you have things you have either earned or purchased, and then they're gone," Whitehouse says. "It's like when the government of a foreign country nationalizes an industry. All of a sudden, your property isn't yours anymore."
In addition, these virtual economies typically use currency with a conversion rate to U.S. dollars yet the funds are only as good as the "full faith and credit" of the company running the servers, he notes. "You own [in-game objects] only as long as the servers are up and service is running."
In the end, a company has the last say in how it decides to treat its customers. User agreements for online games generally note that companies have the discretion in such situations to proceed in the manner they see fit, Matwyshyn states. That means Zynga and Glitch had the right to do what each of them thought was best, even if the two had disparate approaches. "Then it becomes a customer relations and goodwill management question," she adds.
The Customer Is Not Always Right
How then should companies handle customer relations in a digital world? Not much differently than how they handle customers in the physical world, according to Peter Fader, Wharton marketing professor, co-director of the Wharton Customer Analytics Initiative and author of the book Customer Centricity.
Indeed, he says, companies are making a big mistake in thinking that they have to re-write the rules of customer service because of the digital revolution. While the technology might be new, customer habits remain the same.
"Everyone thinks carrying a mobile phone into Starbucks and paying or ordering that way is very different from ordering a set of Ginsu knives from a late-night infomercial," he notes. "It's very tempting to believe that. On the surface, they are very different services and procedures. But when you strip away all of those characteristics, there is just data on people doing things -- and the patterns are remarkably similar."
In the 1960s, Fader points out, studies showed that the best leading indicator of a consumer's future behavior was RFM -- recency, frequency and monetary value. The metric looks at how recently customers made a purchase, how many purchases they made over a specified timeframe and the average amount of those purchases. "That pretty much tells me all I need to know about the customer," he notes.
And the old rules still largely apply, Fader says. "Even when they don't apply, they give us an excellent benchmark, a really great baseline, so that when you see differences due to social media ... you have a better sense of the incremental impact of those new technologies and behaviors."
Yet, businesses still tend to assume that since the world is more technologically advanced now, customers are different as well. Fader suggests that is why some pay too much attention to social media rumblings.
"Companies are being overly responsive. They're listening to every tweet and every Facebook post and basically saying, 'The customer is always right; what are we going to do?'" he says. "I'm all in favor of discrimination in the marketplace. Let's give extra attention to the high-value customers. The other ones ... have to live with it. It's very important for a company to focus on the right customers and not feel compelled to be all things to all people."
In other words, not all customers should be treated equally, Fader states. Firms should focus on high-value customers, those who generate the most revenue for the company and are repeat purchasers. That does not mean the rest should be treated poorly, but they should have lower priority. It is not worth a company's time and money to please every customer, and getting some bad reviews as a result is just the cost of doing business in the digital age, he says.
"If you're upsetting a high-value customer segment, then you have a problem," Fader notes. "But if [certain] people weren't buying that much from you anyway and wouldn't be in the future, it really won't affect the franchise very much. You have to ignore that complaining on the margin and keep marching ahead. You just can't over-respond."
The key is to parse out the online behavior of the high- versus low-value customer. "You need to link that social media activity at the granular household level to their buying [behavior]," Fader says. "That's becoming increasingly possible." For instance, firms can track customers if they are registered users or use a consistent log-in name, he adds.
It is critical for companies to integrate their social media teams more tightly into the customer relations department. Many don't. Instead, Fader says, businesses today tend to operate these teams in silos, "disconnected from other parts of the marketing operation so they have no idea who the valued complainers are. It's very important to be tightly integrated with customer retention activities, and longer-term, to have them tightly integrated with customer acquisition activities."
According to Fader, a company needs to build a comprehensive customer relationship management [CRM] strategy to tie together the old and new approaches. However, "a lot of social media is happening outside of customer relationship management," he notes.
The upshot is that both Zynga and Glitch probably each treated their customers appropriately, Fader states. Because Petville is no longer being prioritized, Zynga made some overtures to customers -- but not too many. After all, it had other games to bank on. Tiny Speck, on the other hand, valued Glitch players highly and thus treated them accordingly.
Zynga is getting bad press for its Petville shutdown, but Fader says the company acted correctly by preferring some customers over others. "I have a lot of respect for what they have done," he notes. "They are a living embodiment of the kinds of things I'm talking about."