The Customer Knows Best | republicainaguantable.com

By KELLY K. SPORS

For small businesses looking for advice, the Internet provides an ideal consultant: the consumer.

All sorts of start-ups and small companies are using the Internet to involve customers in decisions on everything from what to sell, how products look and work, how much they cost, and even how the company operates, like what hours a store should be open or how its floor space should be laid out.

For business owners who are short on cash and have little margin for error, there are two big advantages to using consumers as advisers: They?re cheaper than the professional consultants that bigger companies routinely employ. And the end result is likely to appeal to customers because they were involved in creating it, says Ken Zolot, a senior fellow at the Ewing Marion Kauffman Foundation, a Kansas City, Mo., nonprofit that promotes entrepreneurship.

?Your customers might be better at designing your product than your elite team of product designers, who might be hiding in an ivory tower somewhere,? says Mr. Zolot. Consumers often will provide input out of sheer passion or in return for the chance to win cash prizes or other incentives, he adds.

Tapping Passions

Some companies survey consumers informally, just throwing out questions or ideas to followers on Twitter. Others use blogs or set up online communities where they ask customers to brainstorm or rate ideas.

Local Motors Inc. of Wareham, Mass., a small-scale auto maker started last year, lets anyone upload design ideas onto its Web site. The site occasionally hosts competitions for cash prizes of up to $10,000 in which registered members?who include trained design engineers and transportation experts?vote on the designs they like best or other decisions related to building the autos and how the company operates. The winning ideas are then incorporated in the cars the company builds. Members remain involved after the competitions, offering criticism and suggestions throughout the cars? development.

Others have gotten consumers even more involved. Linda Welch, a Washington, D.C., serial entrepreneur, decided in mid-2007 to seek input from potential customers for a vegetarian and vegan restaurant she was planning. She set up an online forum that invited members to help decide what the restaurant would be called, what its logo would look like, when it would be open, what would be on the menu, and what the place would look like, ?down to the size and shape of the tables,? she says. Members voted on various aspects of the restaurant, and Ms. Welch hosted monthly meetings where forum members could have face-to-face discussions.

?I was blown away by how smoothly it all went, because they were all so passionate about seeing this restaurant become reality,? says Ms. Welch. ?Everybody sort of came in with their own expertise or interest.?

The project is on hold until she can raise the $800,000 or so in start-up cash she needs.

Paul Hoppe

Several companies have sprung up to help businesses interact with customers. UserVoice Inc., based in San Francisco, sets up forums on clients? Web sites where customers can contribute and vote on ideas. More than half of UserVoice?s 16,500 members are start-ups, says co-founder Marcus Nelson. One computer-storage-device start-up, for instance, recently used UserVoice. Hundreds of people voted on ideas to make the product work with wireless networks, among other things.

Striking a Balance

This approach can have drawbacks, entrepreneurship experts say. There?s the risk that the crowd that provides input isn?t representative of the people who might buy the product later on. And innovation may suffer.

Erik Noyes, an entrepreneurship professor at Babson College in Wellesley, Mass., who studies the effects of social networking, says studies have shown that too much democratization of innovation tends to discourage groundbreaking ideas in favor of middle-of-the-road approaches. ?There?s a lot of research to show that the reason that people don?t innovate is because they follow their customer group to the bottom of the ocean.?

Entrepreneurs need to know when to follow their own vision and intuition and when to rely on crowd feedback, Mr. Noyes says. John Rogers Jr., who started Local Motors, has tried to strike that balance. He says companies that solicit public input have to respect it and make it clear how that input is being used, so that people feel appreciated. That involves resisting ?that incessant pull to just make the decision in-house,? he says.

But he also has been diligent about building a community of people who can make valuable contributions to Local Motors? car designs, by marketing his site on other sites that attract design enthusiasts and experts. He also relies on the 10-employee company?s design experts and paid consultants to implement customers? ideas in practical, cost-effective ways, and he still sometimes makes executive decisions, like building the company?s first car for consumers in the Southwest because of the market potential there.

Companies also need to consider that outside contributors might seek compensation if their ideas are adopted. Local Motors, for instance, requires members of its online community to sign off on a lengthy legal agreement to avoid such conflicts.

?Ms. Spors is a writer in Minneapolis. She can be reached at reports@wsj.com.

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