Lithium Helps Companies Rev Up Customer Support by Deputizing ‘Superfans’
If you need help with a glitchy Logitech mouse or webcam and you happen to stop by the company’s online support forum, you might notice a bunch of posts from a guy calling himself KachiWachi. Since 2006, when he started contributed to the forum, KachiWachi has answered more than 45,000 questions from Logitech customers. He spends about six hours a day monitoring the forum, six days a week, and prides himself on being the first to answer any question about a webcam.
But KachiWachi isn’t a Logitech employee, and Logitech has never paid him a cent. He’s just a friendly geek—with a lot of time on his hands—who happens to believe that Logitech makes the world’s best webcams.
If every company could somehow recruit platoons of super-passionate evangelists like KachiWachi to intercept and answer customers’ questions, it would be a compelling way to save money on traditional customer support. Well, there’s a company in Emeryville, CA, that claims it’s possible to build online communities where these “superfans” can be systematically cultivated and encouraged to work their magic. It’s called Lithium Technologies, and it has emerged as one of the most talked-about providers of so-called “social CRM” software (as in customer relationship management).
Logitech is a longtime user of Lithium’s community hosting software, as are AT&T, Best Buy, Hewlett-Packard, Home Depot, Sephora, Verizon, and nearly 500 other consumer-facing enterprises. While a Lithium-powered community is not a substitute for actual customer service—KachiWachi can’t send a customer a new webcam—it can be a useful front yard for a company’s support operations. If you call HP, for example, the first thing you’ll hear is a recorded message asking if you’ve checked out the HP support forum, which runs on Lithium.
“If you are the size of HP, you can get millions of people to go there” rather than wait to speak with an agent, says Lyle Fong, Lithium’s co-founder and, until this fall, its CEO. “Then the question is how do you get them not to trash your brand, but to give you constructive criticism about how you can improve your product, and spread word of mouth and answer questions from other customers, and create a curated knowledge base à la Wikipedia.” These kinds of positive interactions “don’t happen accidentally,” Fong says, and Lithium has now had a decade of experience figuring out how to foster them.
The company was founded in 2001 as an offshoot of the video game community Fong was running with his brother—more on that bit of history in a moment—but it wasn’t until 2007, when Fong took over as CEO, that Lithium went into aggressive-growth mode. Since then, it’s grown to 170 people and raised $30 million in funding from Benchmark Capital, Emergence Capital, and Shasta Ventures, DAG Ventures, and Tenaya Capital. (The company has raised $44 million all told.) Last month Fong handed the CEO reins to Adobe and EMC veteran Rob Tarkoff, an operations expert who was brought in to make sure the company keeps growing its customer base. Fong is now chief strategy officer.
The two executives have a big opportunity in front of them: analysts at research firm Gartner expect the social CRM market to grow to $1 billion by the end of 2012. But as companies look to improve customer satisfaction, Lithium will have to compete with a growing number of alternative platforms, such as community software from Get Satisfaction and Jive, Facebook and Twitter monitoring tools from Assistly (now part of Salesforce), and virtual agent technology from VirtuOz and Next IT. Lithium’s challenge is to convince more customers that the extra expense of building a Lithium-powered community will be offset by reduced costs for other forms of support, or by improved word-of-mouth marketing by happy customers.
If you ask Fong whether he ever expected to be running an enterprise software company, his answer is “never in a million years.” Back in the mid-1990s heyday of first-person-shooter games like Doom and Quake, Lyle dropped out of college at UC Berkeley to play full time with his brother Dennis. The two won dozens of tournaments, and Dennis got into the Guinness Book of World Records as the world’s first professional video gamer. He even won a Ferrari.
But to turn their passion into a real business, the brothers decided to start a community site called Gamers.com. Offering a combination of industry news, game reviews, strategy tips, and discussion boards, the site grew to be the Web’s second-largest gaming community, behind Yahoo Games. Lyle was chief technology officer, and he says he spent part of every day analyzing user statistics and tweaking the sites’ features to increase stickiness and reduce churn. “We learned a lot about consumer behavior and incentivization,” Fong says.
Because Gamers.com was a geek haven, “On the bottom of our pages we would have a version number—2.05b or something nerdy like that,” Fong says. One day Fong got an e-mail from an executive at Dell who’d been hanging out on the Gamers.com forum for Asheron’s Call, one of the early massively multiplayer swords-and-sorcery games. “He took the version number as an indication that maybe we had a product, and he said ‘I think we can apply this at Dell. Can we license it?’”
Fong said yes, and the executive used the software to set up a Dell customer support community, running on an unofficial server under his desk. “It was a huge success,” Fong says. “Now Dell had a place where their customers could talk about anything they wanted. There were thousands of people hanging out there on a daily basis, asking questions like ‘Hey, I can’t get my LCD to display at the right resolution.’ It won several company awards and Michael Dell became a big proponent of it in his keynote talks.”
That was when Fong realized that a spinoff company focused on community software for customers might be even more successful than Gamers.com. He formed Lithium in late 2001, with Michael Thouati, a former vice president at Kodak’s Ofoto photo-sharing site, as co-founder and CEO. Dell was Lithium’s first paying customer. Soon Sony came on board, creating a community for PlayStation users, followed by Roxio, the maker of CD-burning software.
“We bootstrapped the business,” says Fong. For the next six years, Lithium grew organically, increasing its customer base by 50 to 100 percent per year and winning big accounts like AT&T, Motorola, and Nokia. But by 2007, Fong felt it was time to really hit the accelerator. “It was clear to me that [Thouati] wanted to build a lifestyle business, have control, and grow it organically,” he says. “I wanted to go out and build the next Salesforce, the next Omniture, or fail doing it. The market was ripe for that. He agreed and I took over as CEO.”
Under Fong’s leadership, Lithium raised tens of million in venture funding, and became known for the way it uses escalating rewards and other concepts from the game world to encourage its clients’ fans to become superfans and share their knowledge with others. Today that would be called “gamification,” but for Fong it was just a natural legacy of Lithium’s roots in the game community.
Take a case like KachiWachi as an example. After answering a certain number of webcam questions on the Logitech forums, his name on the site might change from the usual black to red. “But we don’t tell him anything,” says Fong. “Someone else notices, and says ‘Hey, how come your name is red?’ He says, ‘I don’t know, actually.’ So there is mystery and intrigue. So he starts answering more questions. As he becomes more trusted and helps more people out, he starts achieving higher ranks. His name is not just in a different color, but bolded. He has an icon or title that no one else has, like ‘Logitech Adventurer.’
“He gets privileges like the right to post videos or images or links. When he votes on something, his vote counts 10 times more than the average person. He may be invited to be an expert blogger on the site, or given access to the VIP lounge where the Logitech executives hang out. He may even be granted the ability to edit and delete other people’s posts. He’s helping to make sure the community is positive and vibrant, but to him it’s like he’s the sheriff in town. He feels needed and wanted. People go crazy for this stuff: the more you drive influencers and give them rank and reputation, the more they are loyal to your site.”
There isn’t really much mystery to the psychology here, Fong points out. It’s all about addressing people’s desire for approval, recognition, and authority.
“When you hire an employee to come to work, the organization is constantly trying to figure out how to incentivize the behaviors they want,” he says. “If you are a change agent they will reward you with a pat on the back. If you do this enough you may get a raise or you may get promoted. Why is it we don’t do the same thing for our customers? The answer has been that it’s not scalable. Companies say ‘We can’t talk to all of our customers all the time.’ But on the Web we’ve learned you can do this at scale.”
Because Lithium manages so many communities, it ends up tracking billions of interactions per day, which, according to Fong, gives it an added advantage: the ability to extract marketing insights from its clients’ communities. “What were people doing [on the forums] that led them to make a purchase and become advocates? What made them into detractors who never came back again? How do you identify word-of-mouth influencers and look at the products that are creating buzz and those that are not? We have a whole team of scientists who do nothing but sit there and analyze that data.”
Fong argues that having lots of customer data to mine in this way is one of the fundamental advantages of being a Software-as-a-Service company, and one of the ways Lithium can stand out from the crowd of next-generation customer support companies. Gordon Ritter, a founding partner at Lithium investor Emergence Capital, agrees. “These communities are an incredibly rich asset for these brands,” he says. “They want to know, ‘What new products should we be launching? Are we answering customer support queries quickly? Can we attract whole new customers to new product ideas?’ If the discussion is all happening out on Facebook you have no control, so the goal is to bring these communities into the brand.”
The biggest obstacle Lithium faces when it’s pitching a new customer, Fong says, is fear of losing control—fear that the hosted communities will fill up with complaints and vitriol. But the fact is that conversations about companies and their products are happening on the Web and social channels anyway (as companies like Assistly argue), so brands might as well embrace them. “Letting people say whatever they want to say on a public website sounds scary,” says Fong. “But once you start building a platform for people to engage with you, the people who really come back are the people who like you.”
Lithium gets high marks from industry analysts. In a study this summer, Gartner ranked it with Jive and Salesforce.com as the leaders in social CRM, showing a critical combination of vision and execution skills. But at the same time, Gartner said the whole social CRM sector is nearing the peak of the classic hype cycle, meaning that vendors “will increasingly have to show examples of how their social data is used in core business processes.” Lithium’s software, in particular, was singled out for being more analytical than prescriptive. Once the system has identified a superfan, for example, it doesn’t suggest what to do if the fan’s engagement level changes.
But on the up side, there’s still a lot of market left to penetrate, and Lithium has doubled the number of communities it manages in 2011, Fong told me in late July. If all goes according to plan, the company could be in position to file for an initial public offering in 12 to 18 months, he said. Of course, that was before the recent perturbations on Wall Street. “We are gearing up toward an IPO, but we are not in any rush,” Fong said. “The main thing we’ve been focusing on is how do we ensure that every time we interact with a company we deliver results that really help them transform their business. Even in this day and age, word of mouth and customer references are the name of the game. So that’s all we obsess about, trying to drive success.”