Remember The Customer: When Digital Rights Management Goes Awry
Over the last nine months or so, I’ve found myself reminding the omni-channel community that “omni-channel ” didn’t start out focused on channels. It began as “customer centricity “. The idea was – and is – that if you place your customers at the heart of your company, then you spend more time worrying about how to break down siloes to meet customer needs, rather than thinking about how to preserve those siloes, whether it benefits consumers or not. In the rush to implement omni-channel strategies, it’s easy to lose sight that all of this activity isn’t about aligning channels to each other. It’s about better aligning the company to the customer. Lose sight of that, and your ability to execute an omni-channel strategy will become severely limited.
Case in point: Keurig. Keurig, for those of you unfamiliar with the brand, is a coffee brewing system. Consumers buy the brewing machine, and insert single serve cups ( “K-cups “) into the machine to make one cup of coffee at a time. The K-cups only fit the Keurig brewer, but it doesn’t take much to figure out how to make a cup that works just as well, just without the “K ” and all the licensing fees that this implies.
Keurig just released its new 2.0 brewer, which comes with one particular unusual feature: a laser reader. If you stick a non-licensed K-cup into the brewer, the laser will not detect the specially-formulated ink on the outside of the cup, and therefore will not brew. Not only does this prevent customers from using non-licensed K-cup knock-offs, it also prevents them from using the old K-cups that are perfectly acceptable in the old Keurig machines. In software parlance, the new brewers are not backwards compatible, and for customers, Keurig is basically saying “too bad ” to the issue. Better use up all your old K-cups before buying the new machine.
Keurig’s move has been widely panned by the public and by pundits both, mostly because it appears incredibly self-serving. It wasn’t too long after the original Keurig brewer came out that brands figured out how to make compatible cups without receiving the official seal of approval. Implementing the laser and ink option in the 2.0 theoretically means that knock-offs just won’t work. If a brand wants to make compatible cups, they must license them from Keurig. Of course, one knock-off manufacturer claims that they have already broken the code on the ink, and there are several anti-monopoly class action lawsuits in motion. Worth it? I guess Keurig thinks so.
It wasn’t that long ago that Keurig was held up as an example of the future of supply chain. Yes, I said supply chain. Three-D printing is the most extreme example of the trend that Keurig represents: moving manufacturing closer to the end consumer. One-to-one match up of demand and supply are managed more easily through downloading a design and carrying some raw materials on hand to make what you need when you need it, rather than trying to develop a forecasting algorithm that can bend space and time.
Keurig and SodaStream were both noted as innovations that enabled the same kind of one-to-one match-up. Last time I checked, you can get 32 cans of Diet Coke for $31.00, and you can order the diet cola refill for SodaStream for $14.83 (shipped to your door – I checked on Amazon, not my grocery store). The refill makes the equivalent of 33 cans of soda. Granted, it’s not the same brand, but the point still works: it costs a lot more to ship 32 cans of soda than it does to ship one bottle of syrup, which the end consumer can make into 32-odd cans. And those are most likely reusable cans or liter bottles, which also means you’re producing less waste.
The same economics work for Keurig, though in a slightly different way. My family owns a Keurig “1.0″. We’ve had it for about 2 years. One member of the family only drinks decaf, and another only drinks fully-caffeinated coffee, and I like hot water for tea or hot chocolate, but not much else. We’re not setting up three different coffee makers for that – or even two. So while Keurig costs more per cup than brewing a full carafe of coffee, in the end we’re throwing out less coffee because we each only make what we need.
But part of the value of a system like Keurig’s should be in the vibrant nature of the ecosystem. And even for Keurig 1.0, and even with “K-cup pirates ” out there, trying to find decaf K-cups is actually kind of hard. There aren’t many choices out there. The more limited my choices are, the less valuable the brewer becomes to me.
And anyway, the innovation in the Keurig system isn’t really the K-cups, it’s the brewer. Alas, brewers aren’t where the money is – stapler manufacturers figured that out ages ago. The money’s not in the stapler, it’s in the staples. Back to 3D printing, is the money in the Makerbot or is it in the filament? Having seen the prices of both, I’m not sure that I can answer that one – seems like they’re making money on both sides of that device. But the one thing Makerbot does not do is limit or put some kind of licensing requirement on the designs you can use it to print.
If Keurig actually valued serving customers, they’d be more interested in creating a model that broadens the ecosystem, rather than narrowing it through silly tricks like a laser reader and custom ink – tricks that harm your own existing customers! However, in order to thrive in that model, they would need to think of themselves not as a coffee system, but as the liquid equivalent of a Makerbot.
But perhaps they’re not in it for their customers after all. That strategy might’ve worked in an age where product reviews weren’t so easy to access. It takes a lot longer for word of mouth to spread far and wide enough to hurt sales than it does for an accumulation of online reviews gathered in all of two weeks since the product launched. And when consumers seem to be looking for “genuine ” and “authentic “, disingenuity is a risky strategy indeed.
For my family’s part, should our Keurig brewer die – and let me tell you, the last two years have not been smooth sailing for our brewer ownership – I’m not sure that I will give yet more money to a company who clearly doesn’t value my brand loyalty.
After all, the flip side of no backwards compatibility is that the customer’s switching costs fall to zero.