Much has been written about Web 2.0 of late. Unfortu-nately, much of it is too conceptual, too utopian, toogranular and technically detailed, or too basic in natureto be used by executives or IT managers to fuel theirorganization’s success. In this article, I will attempt tofill that gap by clearly articulating a series of tacticalapplications of Web 2.0 that can be used today to createincreased shareholder value for your company.

For the purposes of this article, a very brief definitionof Web 2.0 is in order. There are many conflicting, over-lapping, and somewhat contradictory definitions underdevelopment, but I will define Web 2.0 as the economic,social, philosophical, and technical transitions that arecausing the shift from “personal computing” to “socialcomputing,” from a read-only Web to a readable/writable/mixable/hackable Web, and from the domi-nance of the desktop computer to the “Web as plat-form.” That definition is both broad enough and simpleenough to cover all of what I will discuss here.

Shareholder value is composed of three key drivers:1

revenue growth, operating margin, and external expec-tations. This article will discuss how to impact revenuegrowth through the acquisition of new customers, theretention of existing customers, increased sales from anexisting customer base, and, finally, the optimization ofpricing to maximize revenues.

REVENUE GROWTH THROUGH NEW CUSTOMER ACQUISITION

There are two primary drivers of new customer acquisi-tion: marketing and sales and product and service inno-vation. Companies can positively affect both of theseusing Web 2.0 tools and approaches.

Marketing and Sales

One of the first things one would normally be advisedto do when looking at marketing and sales activities

would be to focus on high-value/high-potential cus-tomers. This may be a mistake if your business has adigital product or could have digital/real producthybrids. If so, it may be subject to Long Tail economics,which dictate that sometimes millions of markets ofa few may be more profitable than a few markets ofmillions. (Long Tail theory is beyond the scope of thisarticle. Your best bet is to read Chris Anderson’s bookThe Long Tail [1] and analyze your business against theLong Tail principles.) Instead, focus on your most prof-itable products and services — and don’t assume thatthey are your “hits” and “best sellers.” If your ventureis Long Tail friendly, you may be making more profitoff of the products you sell in smaller batches, and theremay be an opportunity for you to push further downthe tail to sell fewer products to fewer people and tomake more money at the end of the day.

Next, you will want to explore more effective saleschannels and advertising channels. This is straightfor-ward. If your product can be sold in a self-serve fashionover the Internet and isn’t currently being sold thatway, start doing it. If your product is too complicatedto sell in that fashion, then consider building a simplerversion (if there is a market for it) and selling it in aself-serve fashion over the Internet. As for advertisingchannels, expand your use of Internet search as a chan-nel. Pay somebody to execute an effective Internetsearch engine optimization campaign to maximizelead generation.

If your organization doesn’t already have corporateblogs, it needs to start them. This is no longer optionalwhen Web search is now becoming one of the primaryways that your prospective customers will learn aboutyou. Blog postings have inordinately high Google rankand always sit at or near the top of the Google listings.If you don’t want to suffer the fate of Kryptonite or U-Haul, both of which have found themselves withpages and pages of negative customer rants on their

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Driving Revenue Growth with Web 2.0by Troy Angrignon

BABY, YOU CAN DRIVE MY REVENUE

1The fourth value driver in the Deloitte Shareholder Value Map, which was used as the basis for this article, is “Asset efficiency,” butthere were very few ways to impact that driver, so it was excluded from the discussion. The Deloitte Shareholder Value Map can befound at www.deloitte.com/dtt/section_node/0,1042,sid=59402,00.html.

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first Google pages, then first, identify what is great aboutyour company and start telling that story. Second, if youdo have problems, FIX THEM — and then tell that storyto your customers as well. It isn’t bad products that peo-ple hate. It’s companies that make bad products anddon’t learn the lessons and then create better products.2

Product and Service Innovation

There are many routes to product and service innova-tion that can drive new customer acquisition. Amongmany other options, you can:

Broaden your offerings to appeal to more segments(by rapidly modifying existing offerings to better suitcustomers or adding new ones)

Increase the quantity and quality of new offeringsbeing launched3

Improve time to market, the product design process,or the innovation skills of your people

Following are a few suggestions for how to achievesome of the above with Web 2.0. By employing LongTail theory, there is the option of creating more offer-ings that would appeal to the tail. You might:

Move from providing mass-market hits to providingaccess to a much more “niche” product

Drive down the cost of connecting your supply tothe external demand

Increase the number and variety of productsyou offer

Understand and build “filters” that can weed outthe mismatches and provide just the most relevantofferings to each user

Consider the possibility of your customers creatingthe product you sell

Potentially become an “aggregator” of your type ofproduct (including those from other vendors)

Move from an “atom-based” model to either ahybrid model (Web sales with shipped goods) ora fully digital model (in which you can have unlim-ited “shelf space”)

By moving a software company from desktop-basedsoftware development to a Web 2.0 “light, small, fast,and cheap” development methodology, there will bemore opportunity to get feedback from your customers,learn from it, and adapt the product, leading to morerapid product innovation. Finally, blogs, wikis, RSS[Really Simple Syndication] readers, blog editing tools,and RSS aggregators could be deployed as a lightweightknowledge management system [4] through which toshare innovation best practices, learning, and content.By opening this system up to a broad set of employees,partners, customers, and even competitors, innovationideas can come from anywhere, not just from the coredesign team or business leaders. As an example of this,IBM recently launched an Innovation World Jam [2],in which it asks its entire “ecosystem” to help thecompany innovate in public.

Another significant opportunity lies in creating Webservices that access your systems, processes, and infor-mation. No matter what kind of business you are, thereis probably some sort of opportunity to expand thenumber and type of customers that you serve by offer-ing access to your data, services, and systems such thatit makes it easy for a customer to interoperate withouthaving to go down the outmoded and expensive EDIpath. Lightweight Web services are quickly replacingexpensive traditional EDI links. For example, Amazonrearchitected its entire operation around Web services,which allowed the company to build an e-commerceplatform with over a million active retail partners [3].Look at your operations. Think about how you couldopen them up to the world and make it easier for peo-ple and companies to do business with you.

CUSTOMER RETENTION AND REVENUE EXPANSIONFROM THE INSTALLED BASE

Next, let’s look at customer retention and revenueexpansion. There are four levers that can be modifiedto increase customer retention and volume of business:

1. Product and service innovation

2. Account management

3. Cross-selling and up-selling

4. General retention practices

2There are many books and Web articles written on corporate blogging. Two of the better books are Naked Conversations by Robert Scobleand Shel Israel (a good high-level overview of why companies should blog) [5] and Blog Marketing by Jeremy Wright (a detailed look athow to “do” corporate blogging well) [7].

3For example, Zeiss, the German optics manufacturer, came close to bankruptcy in the 1990s. Then it started launching new, innovativeproducts, and by 2004 the company was able to state that it generated 43% of its revenue with products launched in the prior threeyears. This can be a significant route to growth.

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As I covered product and service innovation in the pre-vious section, I will discuss the latter three below.

Account Management

Traditional account management best practices wouldsuggest that you focus on the high-value clients. Yetbecause of the Long Tail, you may create more valueby paying attention to your low-value customers inaggregate. Another standard practice is to rationalizeyour customer base, weeding out the low-value cus-tomers and keeping the high-value ones. If you havea potential Long-Tail business, though, this too wouldbe a mistake. Do the opposite of what conventionalwisdom would recommend and see if you can derivemore value from the customers that are buying smallervolumes but that aggregate to a significant portion ofyour business. This requires that you drive your costsdown as far as possible so that you can make moneyfurther down the tail. This means having a search key-word strategy, using blogs as cheap marketing chan-nels, and moving to a self-service model so thatcustomers can find, learn about, and buy your productor service without interacting with your staff.

Some other actions you could take under the general cat-egory of account management include improving yourunderstanding of customer needs, customer satisfaction,and customer interactions in order to be more responsiveto customer needs. There are quite a few Web 2.0 ways toachieve this, as we’ll see in the following example.

ABC Widgets Meets Web 2.0

Let’s look at an example company and see where itmight apply some Web 2.0 tools and approaches. ABCWidget Co. makes consumer electronic devices, includ-ing toys and games. It is having a tough year after theexploding doll recall incident from last year, in whichthe company was hammered by bloggers for not recall-ing the doll sooner. ABC has some supply chain issues,but the biggest problem lately seems to be the fact thatits products aren’t really selling that well, even when itdoes get them to the store. Customer support calls areup because of some complex product designs, and thecompany has a vague sense that customers are frus-trated, but it isn’t sure how frustrated they really are.

This company needs to start blogging. Yesterday. TheCEO has to get out there and tell the company’s side ofthe story with a human voice. Apologize for the doll

incident and ask forgiveness. This is not the job of thePR department or the legal department, the first ofwhich will speak in corporate speak and the second ofwhich will deny responsibility in order to protectagainst lawsuits. I will say it once again: people forgivecompanies for their mistakes. If a company screws up,people know it. Not talking about it only makes thecompany look worse. In The Corporate Blogging Book [6],Debbie Weil discusses how the Kryptonite damage con-trol team did a great job of actually replacing its cus-tomers’ bike locks. What the company didn’t do wastake the time to tell people about it, thereby leaving abig, blank, embarrassing hole in its blogosphere.

As for ABC, the next step would be to implement someRSS reading infrastructure to start tracking what peopleare saying about the company. When people say some-thing negative, the company needs to admit it if it’strue, or defend it if it’s false. Engage those bloggersonline and learn how to do it well. They are not theenemy — they are ABC’s customers, partners, vendors,and suppliers, who now have a forum for their opinionsthat ABC doesn’t own or control. ABC’s only twochoices are to ignore that conversation or to join it.

Once it has begun to engage its customers, ABC shouldconsider building out some online community for itsusers so that it can begin to find out what they reallycare about. The company could design and build a sitethat serves its customers’ needs and that allows thosecustomers to meet and interact. It should post commu-nity guidelines up front and invite customers to helpbuild the community, generate content, and moderatethe site. ABC will need to reward the good contributors,address the concerns of customers who are ticked offabout something the company has done wrong, andsanction/isolate those who are harmful — not to thecompany, but to the functioning of the community.4

Now, ABC needs to invite its customers in to helpdesign new products. The company could invite cus-tomers to be on a panel where they can provide bothqualitative and quantitative feedback on ABC’s plans.Fixing product design and development up front willcause fewer support issues later on. Failing that, thecompany could at least put up blogs and forums wherecustomers can explain their support issues and maybeeven help ABC to document the problems in an openwiki. After all, customers often know the product betterthan the vendor.

4In one system, the inhabitants all ranked each other. And the “trolls” (those who were simply being abusive rather than constructive)were shown only the other trolls on the system. Eventually they got bored with being surrounded by their own kind, and they left topoison other communities. This is a fantastic example of passive isolation that works well.

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If there are any Web-based aspects to this business, thenABC must immediately begin to instrument its Webapplications so that it can watch every single action thatusers take. There are nuggets of gold buried in thatmountain of “usage pattern data.” By watching its usersuse the Web-based systems and applications that inter-face with ABC’s toys and games, it is possible to deduceneeds that the users themselves cannot even articulatebut that are obvious from the patterns. There are manymore things that ABC could do, but that is a first sam-pling of ideas for supporting better account manage-ment practices.

Cross-Selling and Up-Selling

This leads us to the improvement of cross-selling andup-selling. Now it will become apparent that when weapply Web 2.0 tools and thinking in one area, it oftenhas positive spillover effects in other areas. For exam-ple, when we look at our sales and advertising channelsto identify opportunities to cross-sell/up-sell to existingcustomers, we now know to be aware of the entire tail.We can use low-cost models where appropriate to movefurther down the tail into potentially more profitableterritory.

Back at ABC Widgets, there are a few things the com-pany could do that seem pretty straightforward. Itcould examine its total customer experience and makesure that those experience touchpoints are fast andfunctional. People are getting used to Amazon.com,eBay, and Google, where the window between thinkingof what they want and receiving what they want hasshrunk, and the quality of that interaction has gone upcompared to dealing with other companies. Revisingheavy ERP systems doesn’t count as Web 2.0 thinking,but there might be some places that ABC could applysome lightweight application development to solvesome particularly knotty issues, build out moderatedforums for its users to improve support, and/or moveCD-based software applications online where it canbuild, learn, and adapt them to the users quickly. Thiswould give ABC a faster order-to-delivery cycle time, asthe customer could search for the software/game, clicka button, pay for it, and play it immediately.

One big area of weakness and opportunity involvesbrand strength and goodwill. With Web 2.0, there isno longer any place to hide. Companies that used tobury their customer horror stories in their onlineforums (or worse, delete them from the forums, asApple Computer has done many times in the past) arenow faced with the ugly truth every day when theysearch for their name. I discussed this above in the

“Marketing and Sales” section, but it bears repeating.Chris Anderson said it best: “For a generation of cus-tomers used to doing their buying research via searchengine, a company’s brand is not what the companysays it is, but what Google says it is” [1]. If ABC wantsto retain its current customers and sell them more, thenit needs to react to what its customers are saying. If itsproducts stink, then the company should admit it, fixthem, and then move forward in collaboration with its(remaining) customers.

Retention Practices

Traditional retention policies use a fairly heavy-handedapproach whenever they can get away with it. Thisincludes setting up barriers to switching. The telephonecompanies used to rest easy in the knowledge that peo-ple wouldn’t leave, no matter how awful the servicewas, because they didn’t want to give up their phonenumbers. Once local number portability passed as alaw in the US, people defected in droves (often, unfortu-nately, from one frying pan into another fire). The entireconcept of creating barriers to fence your customers inis wrong-headed and disrespectful.

Here are some ways the management at ABC couldimprove retention. They could start by trying to get agrasp on what is causing their customers to defect inthe first place. This is a lot easier to do if you are deliv-ering some sort of hosted service. It has been suggestedthat the salespeople at Salesforce.com and Jot (hostedsoftware companies that specialize in CRM and wikis,respectively) know within 24 hours if a new customerwill become a real paying customer. They also knowif an existing customer is declining in his or her usageand likely to stop paying for the service. They haveachieved these insights by measuring everything andthen looking in the usage data for patterns that predictbuy signals as well as defection signals.

Because they lack the frequent touchpoints found inan online environment, most companies cannot takeadvantage of this approach. But for those who have fre-quent online interactions with their customers, this is amust. They can measure, recognize patterns, and thenintervene before things go too far wrong and it’s too

The entire concept of creating barriers tofence your customers in is wrong-headedand disrespectful.

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late to retain a particular customer. Establishing cus-tomer communities, forums, advisory panels, and thelike is a good way to solicit feedback and uncover issuesthat are causing customers to consider defection so thatthey can be addressed early and often.

PRICE REALIZATION

Finally, we come to price realization — that is,how much can you charge for this product with thiscustomer in this market? There are two key levers thatcan affect pricing. Hearkening back to Economics 101,it is easy enough to remember that if you want higherpricing, you can restrict supply or increase demand. Andyou can also optimize pricing in your market such that itmaximizes revenues. Remember the old lesson: if youprice your widget at $20 and sell 10 of them, you willmake $200, whereas if you price it at $18 and sell 20 ofthem, you will make $360.

So where can you apply Web 2.0 to impact the price youreceive for your offerings? Let’s start, as we have withthe other factors, by disabusing ourselves of some tradi-tional thinking. Standard economic pricing theory dic-tates that you want to find price-insensitive buyers sothat you can push the price higher. Long Tail theorychallenges that assumption and states that you mightfind very price-sensitive customers way down in thetail that might still buy a lot from you in aggregate ifyou get the offering/pricing matrix right. Once again,review your offerings with Long Tail glasses and becareful not to be trapped by the old mode of thinking.

Back at ABC Widgets, in order to drive higher prices,the company could increase product innovation andwork on its brand image (and related search results),both of which I have covered above. Next, by movingits software offerings from perpetual license CDs to arecurring revenue, software-as-a-service model, it canshorten time to market (using Web 2.0 developmentmethodologies such as Ruby on Rails, Ajax, and generalagile development principles) and improve the func-tionality of those offerings through rapid customer-dri-ven iteration. To optimize pricing, ABC could run testson the Web to see how prices affect prospect-to-cus-tomer conversion rates, with a view toward maximizingconversions and, therefore, revenues. And the blogs,customer advisory panels, and communities the com-pany has already set up can be used to explore andbetter understand those benefits of its offerings thatcustomers really care about. This will enable ABC tomodify features and optimize the pricing for each of the

offerings and customers — in other words, striking aprice elasticity balance between price and volume thatwill maximize revenue.

CONCLUSION

The examples and suggestions above are not encyclope-dic, nor were they meant to be. They were intendedas a general starting point for companies to begin tounderstand how the various Web 2.0 technologies andattitude shifts fit together and map to the shareholdervalue levers. We have seen how specific Web 2.0approaches and tools can be used — today — to driverevenue growth in an organization by impacting theacquisition and retention of customers, the amount ofrevenue that is earned from those customers, and theprices that your company can charge for its productsand services. As for next steps, map out your own busi-ness, read up on the various technologies, and see if youcan fulfill any of your business goals using the toolsabove. Then prioritize them and start building. Test,learn, adapt, and repeat!

REFERENCES

1. Anderson, Chris. The Long Tail. Hyperion, 2006.

2. “Big Blue Brainstorm.” Businessweek Online, 7 August 2006(www.businessweek.com/magazine/content/06_32/b3996062.htm?chan=tc&campaign_id=rss_tech).

3. Gray, Jim. “A Conversation with Werner Vogels.” ACMQueue, Vol. 4, No. 4, May 2006 (www.acmqueue.com/modules.php?name=Content&pa=showpage&pid=388).

4. LaMonica, Martin. “Corporate America Wakes Up to Web2.0.” CNET News.com, 26 June 2006 (http://news.com.com/Corporate+America+wakes+up+to+Web+2.0/2100-1012_3-6087566.html).

5. Scoble, Robert, and Shel Israel. Naked Conversations. JohnWiley and Sons, 2006.

6. Weil, Debbie. The Corporate Blogging Book. Portfolio, 2006.

7. Wright, Jeremy. Blog Marketing. McGraw-Hill, 2006.

Troy Angrignon has a day job as the Emerging Technology Strategistfor Business Objects, where he is tasked with identifying new growthopportunities, offerings, and business models that arise from new andemerging technologies. He is currently focused on Web 2.0 strategy,software as a service, and Web services strategy. Outside of that role,he also mentors and advises startups on business strategy, businessplanning, and market analysis. In addition, Mr. Angrignon is a pas-sionate outdoor sports enthusiast and nonprofit volunteer who livesin Vancouver, BC, Canada. Mr. Angrignon can be reached at troy.angrignon@businessobjects.com.