Is Exact A Co-Creating Company?


Introduction

Since 1984, Exact has developed innovative software solutions for about 200,000 businesses worldwide and this number is still growing.  Exact explicitly states that it wants to serve the entrepreneurial businesses with information technology by delivering sophisticated business software solutions and high quality services. But how does the company involve their customers in delivering these software solutions and is simultaneously able to offer high quality services? More important: what are the future implications for the company in their co-creation attempt with its customers.

Exact Business Model

The business model of Exact is based on a software-as-a-service model and allows customers access to the services provided by the company, in exchange for a monthly subscription fee. Customers are classified in light, medium and heavy users and pay an additional charge as usage of the services increases. Thus, Exact has evolved its services from a traditional Application Services Provider (ASP) model to a SaaS model where it is also important to note that the company is increasingly investing in cloud computing. This is because the dynamics of cloud computing are different and necessary changes can be implemented more quickly in favour of all customers.

How Exact Co-Creates With Its Customers

Especially in the service offerings to customers, Exact pursues to join forces with its customers. As customers use the service management solution, they provide user feedback that the company uses to improve its service offerings. The growing number of users using the service management solution shows that customers can help improving the quality of the offered services by providing feedback. Exact on their turn answers on the needs of customers by implementing incremental innovations in the service offerings. Thus, Exact is building on the modernized concept of Prosumerise, which is known as the joint responsibility of consumers, professionals and enterprises to improve and transform services.

Is There More Potential?

It is interesting to see that Exact has already taken a small step with this co-creation project to let customer participate in the improvements and further developments of the service management solution. However, critical for the success of their co-creation strategy is that Exact should encourage customers to provide feedback and suggestions which helps tie them more closely to Exact its services (Merlo et al., 2014). This results in better co-creation by increasing customer participation.  According to Brunoe et al. (2014), Exact should benefit from innovation success, reputational results and organizational results, compared to non-creators. As Exact is still heavily investing in cloud computing, financial results cannot yet be seen. To cope with future uncertainty on co-creation, Exact should follow the recommendations from Gustafsson et al. (2012). They suggest that in this case, Exact should continue to combine co-creation and innovation using incremental innovations in their service management solution and dialogue with the customer. Opening up the dialogue with customer also results in better understanding the customer needs. Also, it is important to treat customers as equal partners and create a feeling of joint responsibility. Summing up, Exact is on the right way to become a co-creating company!

References

IEEE (2007) “The Business Model of “Software-As-A-Service”, retrieved from: http://ieeexplore.ieee.org/xpl/login.jsp?tp=&arnumber=4278733&url=http%3A%2F%2Fieeexplore.ieee.org%2Fxpls%2Fabs_all.jsp%3Farnumber%3D4278733, viewed on 3rd April, 2015.

Exact Introduces Newly Flexible Delivery Model (2014), retrieved from: http://www.exact.nl/over-exact/publicaties/persberichten/3533-exact-introduceert-nieuwe-flexibel-opgezette-leveringsmodellen, viewed on 4th April 2015.

Brokaw, L. (2014) ‘The Big Upside of Customer Participation’, retrieved from: http://sloanreview.mit.edu/article/the-big-upside-of-customer-participation/, viewed on 4th April 2015.

Gustafsson, A., Kristensson, P., Witell, L. (2012)  ‘Customer Co-Creation In Service Innovation: A Matter Of Communication?’, Journal of Service Management, (23), 3, 311- 327.

User-driven firms vs. Designer-driven firms. Which products do consumers prefer and why?


Over the past years, researchers have identified a new role that users can fulfil in the value creation process of firms. User-driven designs have proven to be strategically effective in many different industries. Examples are Apache (software), Quirky (household products), Muji (furniture) and Threadless (apparel). User-driven design can be defined by an innovative approach in which organizations encourage their user communities in generating ideas for innovative products. In this way the users take the lead in the design process by submitting ideas based on their wishes and needs. This is an easy and effective way for the company to involve users and might be more successful since, the real time needs of the consumers are taken into account.

The article by Dahl, Fuchs and Schreier (2014) focuses on the impact of this innovative strategy on non-participating, observing users. The study has found that the implications of this effect can differ. Therefore the authors tried to investigate why and when consumers actually prefer products of user-driven firms in order to provide more insight for user-driven markets.

Three experimental studies conducted in this research have resulted in interesting findings. First of all, non-participating, observing consumers tend to buy user-generated products rather than products from designer-driven firms. This preference can be explained by social identification. The fact that consumers are also users and their social identities tend to connect to the user-designers. They feel empowered in the process of being involved in generating designs.

Secondly, after further investigation the authors came to find that the social identification account can predict when the aforementioned effect does not materialize. For instance, it appears that when consumers feel dissimilar to participating users, the effect diminishes. The study has proven that consumers feel dissimilar based on significant demographics (i.e. gender) or when they feel that they do not belong to the social group of participating users (i.e. non-experts). Another case in which the aforementioned effect diminishes is if the user-driven firm decides to be selective in participation. Meaning, the firm does not allow every user to participate in the idea generation process, but just a selective group of users. This can lead to a feeling of isolation or social exclusion for observing consumers.

What I find striking in this research is the fact that observing, non-participating users do prefer user-generated products, while they were never involved in the process. I would understand such an effect if the consumer participated in the process. However, in this case the product designed by the firm itself could be way better since the wishes of the observing consumer were not taken into account at all. Meaning, because the observing consumers know that the products are user-generated they would rather buy that product, because of social identification. During the research they were informed about the production situation and I think they would therefore go for the ideal situation based on social identification. Therefore I cannot help but wonder, would the findings still be the same if the consumer did not know if the product was from a user-driven firm or designer-driven firm?

Source: Dahl, D. W., Fuchs, C., & Schreier, M. (2014). Why and When Consumers Prefer Products of User-Driven Firms: A Social Identification Account.Management Science.

Tryvertising


Breaking with the traditional seller-buyer relationship, more and more companies involve customers in their business processes. Studies predict that by 2017, half of all producers of consumer goods will receive 75% of their innovation and R&D capabilities from crowdsourced solutions. Companies are empowering their customers to benefit from their experience, expertise, motivation and time. But what’s in it for the costumer? To encourage customers to participate in the companies innovation activities there must be a reward for the customer.

One form of customer involvement which includes a win-win situation for the company and for the customer is tryvertising. Tryvertising refers to the opportunity given to consumers to test products for free in order to provide valuable feedback on their experience with the product. In tryvertising the consumer is directly targeted and users are in direct relationship with the company for whom they test.

Tryvertising can be used as a research tool in the testing phase. The testing phase of a product is a very important phase in the new product development process. This step in the product development sequence checks the adequacy and consistency of the end product with its original goals in order to assess the level of refinement required. Therefore, insufficient or ineffective testing phases can lead to dramatic results during the market launch of a new product. To avoid those dramatic results companies can provide experienced consumers a free product in return for their feedback. This feedback can also lead to increased understanding of their consumers’ perspective on a certain products and their purchasing intentions.

Tryvertising can also be used during the market launch of a new product. Companies can provide consumers with a free product in return for a review online. These free products can create an online buzz that helps to increase brand visibility during the market launch. An example of a company that uses this technique is Bol.com. They are partnering up with brands and provide consumers with a free product in return for a review on their website. This generates revenue for Bol.com, the brands and the consumer is rewarded with a free product.

An example of a marketing company that is specialized in tryvertising is Sampleo. Through their online platform they connect brands with consumers willing to test new products and share their opinion on the product performance with the manufacturers or with other consumers online. The reward for the consumer is clear: they get a free product. The founders of Sampleo won a couple of awards with this business idea (Start in Paris #11, Petit Poucet 2012, Graines the Boss competition 2012). Sampleo creates more exposure for products as it directly targets the right end users. The users decide themselves which products they want to engage with.

Free

http://news.eyeka.net/2013/10/more-than-half-of-consumer-goods-companies-will-use-crowdsourcing-by-2017-gartner-report/

http://ec.europa.eu/enterprise/policies/innovation/policy/business-innovation-observatory/files/case-studies/36-cue-customer-incentives.pdf

http://www.em-lyon.com/en/emlyon-entrepreneurial-education/emlyon-business-school/EMLYON-Incubator/EMLYON-Incubator/Club/SAMPLEO

http://www.sampleo.com/

The Effect of Ordering Decisions by Choice-Set Size on Consumer Search


This blog post is based on the article ‘The Effect of Ordering Decisions by Choice-Set Size on Consumer Search by J. Levav, N. Reinholtz, and C. Lin.

Consumers have to make lots of choices nowadays. Making good decisions can be difficult, both for the consumer and for the company that wants to influence the consumer to make a certain choice. There are several theories on how to manipulate consumers during their decision process. In this article it is investigated on how the order of choice set sizes leads to different choices. Several experiments were conducted, of which the first one will be described below.

In this experiment participants were asked to create a CD with 10 songs for a road trip. There were 10 song selection screens, where they could listen to examples of the songs. In each screen the participants had to select one song that they would like to have on the CD. The participants were told that they would receive the CD they created after the experiment. There were two groups of participants, participants of the first group were shown a number of options for the songs that increased by five in every screen, i.e. for the first song the participants had to choose there were five options, for the second song there were 10 options, so for the 10th song there were 50 options. For the other group, there were 50 options for the first song, decreasing to 5 options for the 10th song. The experiment showed that even though both groups of participants had the same amount of choices in total, participants in group 1 sampled on average 149 songs (out of 275 songs), while participants in group 2 sampled on average 101 songs. Participants in the first group also spent more time on making their final decision.

This experiment shows that consumers facing an increasing choice-set size spent more time on searching for the best option. This effect is confirmed by the other experiments in the article. Another outcome of the experiments was that the first choice that a consumer has to make, is the most important one in influencing the mind-set of the consumer for the following choices. The level of increase in choice options is also relevant; abrupt increases tend to reduce the level of search of the consumer.

It can be concluded that ordering decisions in an increasing choice-set size is a simple way for managers to influence choices of consumers, because it increases consumer search and therefore engagement. A disadvantage of this method that has to be mentioned though is that this deeper search of consumers can lead to a lower satisfaction after the purchase.

Reference:

Levav, J.; Reinholtz, N.; Lin, C. (2012) ‘The Effect of Ordering Decisions by Choice-Set Size on Consumer Search’. Journal of Consumer Research, 39(3), pp. 585-599. Available at: http://www.jstor.org/stable/10.1086/664498?origin=JSTOR-pdf

http://www.epicparent.tv/wp-content/uploads/2013/04/QUESTION-MARK-600×300

Thank god it’s Friday!


A creative gateway to the festival Extrema Outdoor, the design and inspiration for a new buddha to buddha bracelet or the design for a new tattoo for Dré Hazes. These requests or so called Calls for Creation have already been answered, co-created and fulfilled using the Created on Friday platform.

Created on Friday is a video-based platform in which clients, creative minds and followers are connected in Creation Stories. With already 12 co-created final products and 16.000+ creative minds and followers, they are experiencing a promising start. What makes this platform different related to others and how does the consummation look like ?

Creating a Creation story process

1st FridayCall for creation

On the 1st Friday at midnight, the client submit a Call for Creation video. With uploading this video based Call on the online platform, a client opens the request for action towards creative minds. As already presented above, the topic of call for creation can be anything of choice based on the client request for a unique concept e.g. design, art or a new marketing campaign.

During the first week, anyone with a creative mind can respond on a specific Call for Creation by uploading their creative solution. Again this response will be delivered in the format of a video-pitch. The video pitch will be shown to online crowd, to give them a proper feeling and understanding of the solution proposed by the creative mind (person, company). The online public or followers, in turn, will vote for their favorite videos resulting in a dynamic top 5 ranking on the basis of video views and votes during this week.

2nd Friday – Winner gets chosen,  nr 2,3,4,5 announced

On the 2nd Friday the top-5 will be frozen and the client decides which pitch will be awarded as the number one. Interesting fact is that the client still can decide to choose a winner outside of the top 5. Having said that the client’s favorites are presented in a frame on the client’s Call for Creation page. This way the client can influence indirectly followers’ voting behavior. The nr 2,3,4,5 of the video-based pitching contest will be awarded with money. Besides the financial rewarding, the top-5 creative minds and their solutions will be announced on the platform making use of a video. In this way the creative mind talents will be shown to all the followers. On top of that, the winning creative minds will be part of the Created on Friday wall of fame.

During the second week, in a Meet & Making of, the client and winning creative mind co-create, further develop and fine-tune the winning idea into a final creation. Taking into account that the client is responsible for all the resources needed to come up with the final creation.

3th  Friday – Final creation

After 14 days of pitching, voting and co-creating the final product will be presented. Not surprisingly, this will be done using a video message on the Created on Friday platform.

 Success

Using online video content during the creation story, allows both clients, a creative mind and followers to share their findings and ideas towards a large crowd. In my opinion, the use of different social media channels ( YouTube, Facebook, Instagram ), makes Created on Friday a unique marketing “machine”.

Secondly I am really curious about the impact Created on Friday could have on nowadays marketing/design agencies. Noticing that these agencies mostly of the time charge a lot of money and consume more than 2 weeks to come up with a final product.

Since it’s founding by the end of 2014 , already 12 Creation Stories have been created. In my opinion, many more will follow. Top priority will be the supply of new Calls for Creation by clients.

Created by: Luut Willen

References :

Decision Quality Measures in Recommendation Agents Research



In the digital age of consumption, the internet has been a platform that has greatly enhanced the choices available to consumers. Despite the internet’s potential to enhance consumer utility, this vast increase in choice can potentially overwhelm customers and lead to worse choices (Lurie 2004). A growing trend has been the use of recommendation systems by online retailers and content providers. These systems seek to predict the rating or preference that potential consumers would give an item and suggest products or content based off those. In the world of e-retail, Amazon’s recommendation system is widely recognised as the industry leader, which helps consumers through item-to-item collaborative filtering, suggesting items based on previous purchases or views by other consumers with potentially similar interests or preferences.

The decision quality of electronic recommendation systems also serves as an indicator of service quality (Zeithaml et al, 2002), however, little academic research has been done in this field. The 2011 paper by Askoy et al ‘Decision Quality Measures in Recommendation Agents Research takes a closer look at the decision quality of such systems. The paper examines empirically examines the relationship of different measures that have been used to date in recommendation agent literature. In the paper, they distinguish between preference-dependent measures (PDM), which require knowledge of the different decision maker preferences as well as the attribute values of alternatives that are available; preference independent measures (PIM), that do not require any knowledge of individual decision maker preferences but do require product attribute values, and subjective measures (SM), which depend neither on the knowledge of consumer preferences nor attribute values (Askoy et al 2011: 111). Through a simulated experiment, participants were assigned to conditions simulated by a recommendation agent for a database of 32 cellphones, which were each defined by different attributes (price, weight, talk time and stand-by time). This allowed the experiment to simulate a wide range of recommendation agents currently offered by online retailers to their customers.

Results which compared PDM and PIM results verified that there are considerable gains from knowing consumer preferences that are gathered by recommendation agents. Furthermore, PIM measure prove to a way of assessing decision quality when decisions are unknown. These results suggest that setting up mechanisms to compare product attribute values may be highly beneficial to online retailers even if recommendation agents are not in use.

Electronic recommendation systems help customers sort through the ever-increasing array of choices and alternatives and make better and more informed choices. Similar to real salespeople, electronic agents can serve dual roles of being both providers as well as collectors of information. The paper serves as an initial step in assessing the decision quality as a metric for gauging the impact of marketing activities and to help marketing practitioners have a better understanding of the effectiveness of such electronic recommendation agents. This is certainly an area that will be a growing area of interest as companies aim to better their own recommendation systems to increase sales and increase utility and satisfaction of customers.

Sources
Askoy, L., Coil, B., Lurie, N. (2011) “Decision Quality Measures in Recommendation Agents Research”, Journal of Interactive Marketing, vol. 25, pp 110-122

Lurie, Nicholas H. (2004), “Decision Making in Information-Rich Environments: The Role of Information Structure,” Journal of Consumer Research, 30, March, 473–86.

Zeithaml, Valarie A., Parsu Parasuraman, and Arvind Malhotra (2002), “Service Quality Delivery through Web Sites: A Critical Review of Extant Knowledge,” Journal of the Academy of Marketing Science, 30, 4, 362–75.

CO-CREATION IN VIRTUAL WORLDS:  THE DESIGN OF THE USER EXPERIENCE  


Bringing customers into the co-creation environment is not always easy. Therefore, Kohler et al., (2011) believe virtual technology is the next crucial tool that can leverage the co-creation between firms and customers. In the study, they investigate how people can be attracted to co-create virtually. The authors pick an online game called Second Life. Basically, it is an online virtual world in which the players can socialize, connect, and do pretty much regular activities that can be done in the real world. In this world (or game), the authors conducted 3 different experiments in 3 different co-creation systems called Ideation Quests (IQ) where existing communities (frequent players) were participating. Not only it is unique, it has never been done properly before. For that reason, this article has given significant contribution with regard to how firms should design virtual co-creation environment so as to leverage co-creation.

Building upon the virtual customer experience of Nambisan (2007, 2008, 2009), the authors worked together with KTP and Philips for the first 2 Ideation Quests. After the collaboration between these companies and participants finished, the authors evaluate the co-creation systems (IQ) by conducting an in-depth interviews, observing participant’s behavior, and studying the log analysis (Heat Map) and interaction among avatars. The evaluation is used to identify what are elements of participant’s experience in the virtual world that encourage them to co-create virtually. As a result, there are 5 dimensions of experience that are believed to increase the likelihood of online players to participate in virtual co-creation process.

Firstly, pragmatic experience is measured from the information quality and technological aspect. From the study, interactive objects are seen as very important learning opportunity so customers can understand the new product/idea quickly. Furthermore, the IQ should incorporate audio, video, or even animation effects to catch customer’s attention effectively. Then, participants must be introduced to immersive type of co-creational situation that stimulate multiple senses (instead of instruction-based situation).

Secondly, sociability experience is what allows the participants to interact with others easily. Firms can create events to attract huge number of people and allow collaboration among them to manifest. The firm’s representatives should also be interacting with the customers as majority of participants expect to have direct contact with the brand as well. Subsequently, firm may help providing individual support that can reduce participants’ cognitive cost.

Thirdly, usability experience is measured by how the computer can understand what the player wants and vice versa. To avoid such confusion, the infrastructure needs to be simple and intuitive. Navigation  structure also needs to be clear, especially if the firm is using multiple places for the co-creation activity. Moreover, It is recommended that the IQ must incorporate behavioral activities that are resembling real-world activities for participants to easily understand the whole process.

Fourth experience is hedonic.  This is often seen as the source of pleasure and enjoyment. Nurturing playfulness is often associated with creativity and thus generate new ideas.  It can be done by incorporating game mechanics and playful elements. Furthermore, the inclusion of challenging tasks will drive participations from competitive and curious people from which interesting ideas might be born.

Lastly, collaborative experience encourages participants to co-create the co-creation system themselves. With that said, participants are granted with high degree of freedom to adjust the environment (together with other participants) where they will be co-creating.

 

References

Kohler, T., Fueller, J., Matzler, K., & Stieger, D. (2011).” Co-creation in virtual worlds: the design of the user experience”. MIS quarterly35(3), 773-788.

Nambisan, S., and Baron, R. A.  (2007).  “Interactions in Virtual Customer Environments:  Implications for Product Support and Customer Relationship Management,” Journal of Interactive Marketing (21:2), pp. 42-62

Nambisan, S., and Baron, R. A.  (2009).  “Virtual Customer Environments:  Testing a Model of Voluntary Participation in Value Co-Creation Activities,” Journal of Product Innovation Management (26:4), pp. 388-406

Nambisan, S., and Nambisan, P. (2008).  “How to Profit from a Better ‘Virtual Customer Environment,’” MIT Sloan Management Review (49:3), pp. 53-61

 

 

 

 

 

 

 

What’s New from Amazon?


“Selling services on Amazon : reach customers in your neighbourhood and grow your business”

Amazon Dash Button : “everything’s at the touch of a button”

What at first was an online bookstore now becomes one of the biggest online retailers worldwide. Amazon sells pretty much everything, from home appliances to clothing and even groceries. Its business model enables users to be actively involved by allowing them to act as buyers as well as sellers. Buyers are also encouraged to review sellers and share their experiences to build trust among each others. These involvements lead to users as co-creators of value. According to Saarijärvi et al (2013), value co-creation offers opportunities in identifying new ways to support either the customer’s or the firm’s value-creating processes. This business concept allows Amazon to capture greater value than it could have independently.

Being an e-commerce site leader doesn’t stop Amazon to grow its business. Based on The Economist (2015), on March 30th it announced Amazon Home Services which sells services. This service has a trial version called Amazon Local Services, which has been testing in some American cities since late 2014. So how does it work? Customers in several cities in the United States can search for the services they need and purchase it or submit a custom request on Amazon.com. There would be builders, plumbers, mechanics, and even music teachers offering their services to customers in their neighbourhood. To simplify the transaction, standard services have set prices up front while custom services can be requested (Amazon, 2015).

This service is a smart move from Amazon (if it succeeds), it offers convenience for customers as they will be able to locate nearby builders, plumbers, or any other services available in the website. Customers can purchase a service while shopping for products related to it, therefore Amazon encourages people to buy products (i.e. home appliances) from them as customers can simply have it installed too through the service. Not only that, the services providers also gain benefits from this, as Amazon takes care of the payment process while also exposed them to potential customers through the website and also provides them with easy-to-use tools.

Youtube : “Introducing Amazon Home Services”

As if the Amazon Home Services announcement is not enough, the firm has another news this week. It introduced Amazon’s “Dash” buttons, wireless-connected buttons for members of its Prime scheme branded (The Economist, 2015). The idea is consumers have these buttons in their homes and they can simply press it whenever they need certain household items. By pressing the button, an order of those certain items will be placed on Amazon.com then delivered to the customer’s home. People always keep trying to find new ways to make their life easier and this button is certainly attempting to do so. Though it seems easier to simply push a button rather than actually order an item online, which might required more than a couple of minutes, I have my doubts in this “smart” buttons. People obviously have lots of household items, not just a thing or two, and though it’s still not very clear about the technical of these buttons, I think people wouldn’t want to have lots of buttons in their homes for each of their items. And also, since it is a button, it would be small and people could easily forget where they put it and lose it. It would be even trickier for people who have kids at home. That being said, I don’t think these buttons would be practical to use.amazon dash buttons

(The Economist, 2015)

References

Saarijärvi, H., Kannan, P., and Kuusela, H. (2013). ‘Value co-creation : theoretical approaches and practical implications‘, European Business Review, 25(1), pp.6-19.

http://www.economist.com/news/business-and-finance/21647715-connected-devices-home-are-becoming-more-widespread-sensors-and-sensibility

http://www.economist.com/news/business-and-finance/21647529-americas-biggest-online-retailer-attempts-take-another-slice-demand-economy-books

http://services.amazon.com/selling-services/benefits.htm?ld=NSGoogleAS

The value of IT-enabled retailer learning


Zhang, T., Agarwal, R., & Lucas Jr, H. C. (2011). The value of IT-enabled retailer learning: personalized product recommendations and customer store loyalty in electronic markets. MIS Quarterly-Management Information Systems,35(4), 859.

The Internet is capable of bombarding its users with information, resulting in an information overload or choice overload. Adapting information to the needs of individual consumers alleviates this information overload. Information personalization is practiced to present the product information that individual consumers want to see in the appropriate manner and at the appropriate time (Pierrakos et al., 2003). Online retailers have widely adopted  personalization as a means to enhance the shopping experience of their customers in order to build and maintain a strong customer relationship. Online retailers can implement information personalization by offering real-time personalized product recommendations (PPRs) to their customers.

This article investigated whether PPRs generate value for online retailers, and if so, how. The authors looked at the effects of online retailer learning (in the form of higher quality PPRs) on consumer store loyalty. In their research they manipulated the quality of the retailers’ learning, resulting in varying qualities of PPRs offered.

Below are the conceptual model of the mechanism through which personalized services affect consumer store loyalty (figure 1) and the research model (figure 2) including the tested hypotheses.

Figure 1

Figure 1.

Figure 2

Figure 2.

H1a: Higher quality PPRs are associated with lower consumer product screening cost.

H1b: Higher quality PPRs are associated with higher consumer product evaluation cost.

H1c: Higher quality PPRs are associated with higher consumer decision-making quality.

H2a: Higher website knowledge is associated with lower consumer product screening cost.

H2b: Higher website knowledge is associated with higher consumer decision-making quality.

H3a: Lower consumer product screening cost is associated with higher consumer store loyalty.

H3b: Lower consumer product evaluation cost is associated with higher consumer store loyalty.

H3c: Higher decision-making quality is associated with higher consumer store loyalty.

The authors designed the experiment as a two-phase task. The subjects’ first task was to rate a list of Amazon.com’s DVDs. Their second task was to pick two DVDs from the website.

The authors’ findings show strong support for the proposed model. They find that, indeed, higher quality PPRs are positively associated with consumers’ online product brokering efficiency: higher decision-making cost and lower product screening cost, and ultimately repurchase intention.

The insights derived from this article could serve as guidelines for online retailers to better adjust their IT strategies to improve customer retention. PPRs have the potential to create a virtuous cycle: the more purchases made by consumers, the higher the level of input to the recommender system, the higher the quality of PPRs received by consumers, the higher the consumers’ online product brokering efficiency, the higher decision-making quality and the lower the product screening cost, and, finally, the higher consumers’ repurchase intentions. This brings sustained competitive advantage, because it becomes increasingly more difficult for competitors to imitate. When consumers switch to another store, their shopping efficiency will suffer.

References:

Pierrakos, D., Paliouras, G., Papatheodorou, C., and Spyropoulos, C. D. 2003. “Web Usage Mining as a Tool for Personalization: A Survey,” User Modeling and User-Adapted Interaction (13:4), pp. 311-372.

Reviews & Ratings: Consumer online-posting behavior


“Unfiltered feedback from customers is a positive even when it’s negative. A bad or so-so online review can actually help you because it gives customers certainty that the opinion is unbiased.” 

– Source: Gail Goodman, Entrepreneur, 2011

Social media delivers an ultimate platform for customers to broadcast their personal opinions regarding purchased products and services and therefore accelerate word-of-mouth (WOM) or consumer reviews to travel fast. Nearly 63% of consumers are more prone to buy products on a website that has online consumer reviews (iPerceptions, 2011). Online consumers reviews are trusted 12 times more, in comparison with descriptions of the product stated by the manufacturers themselves (eMarketer, February 2010). Companies who provide space for reviews on their websites, have an increase in company sales of nearly 18% (Reevoo). This video below defines how customers can assess online consumer reviews and recommendations while researching and shopping online.

Youtube: “Online Reviews and Recommendations”

Chen et. Al (2011) examined the interactions amongst consumer posting behavior and marketing variables such as product price and quality. An important part of the research was about how such interactions progress as the Internet and consumer review websites draw widespread approval where people use it more often. The study’s new automobile models data comprised of two samples that were gathered from 2001 and from 2008. As an automobile involves thorough searching before making a significant financial decision, these years were seen appropriate. Also more consumers made use of the Internet between 2001 and 2008 when considering purchasing an automobile. A total of 54% of new-automobile consumers made use of the Internet in when buying a car in 2001, reported by Morton, Zettelmeyer and Silva-Risso. According to a report by eMarketer, in 2008 this percentage was increased to nearly 80%. This study included prominent automobile review websites that covered the distinctive sections of the market— leading car enthusiasts (experts) as well as amateur consumers.

91-review-sites-e1415383495712

Motivations for Posting Online Consumer Reviews.

Gaining social approval – self-approval – indicating a level of expertise or social ranking – by demonstrating their superb purchase decisions, are all psychological reasons why consumers post online reviews. It can also be used to state satisfaction or dissatisfaction. Diverse types of customers are driven by distinctive motivations for posting reviews online. The earlier group of Internet users (in the study – year 2001) differs from the second group of Internet users (year 2008) when it comes to the reasoning as to why they post online. The consumers categorized as early group of users (a.k.a. experts – early adaptors of innovation) have high levels of product expertise, making them more likely to be psychologically seeking status and engaging in noticeable consumption. They are seeking to representing know-how and social ranking is particularly significant in the Internet’s early years (2001), as they tend to have high incomes and are more so price insensitive.

Conversely, the Internet has advanced and developed over this period, and it has appealed to a bigger population of types of consumers. Where, in 2001 it used to be a select group of Internet users who would post reviews, the Internet usage and online consumer review sites of today have become more mainstream. The Late adopters (2008) cultivate to be more no-nonsense and price focused compared to early adopters.

Marketing variables – effect on consumer online-posting behavior

Marketing variables indeed have an influence on consumer online-posting behavior. In the early stages of the Internet (2001) the price of products had negative relationship but premium- brand image has a positive relationship with the number of online consumer postings; differently, product quality has a U-shaped relationship with the number of online consumer postings. These different relationships are likely to be driven by early adopters of Internet usage.

The Internet infiltrates to mass consumers online, who are more inclined to be price sensitive as well as value driven.

Though certain marketing variables can lead to a big number of consumers engaging in online posting activities, these consumers do not automatically give higher ratings. The study shows that mass consumers lean towards posting online consumer reviews at higher as well as lower purchase price levels. In contrast to posting online consumer reviews primarily at lower price levels, which happened frequently during the early stages of Internet usage. The Internet has been accepted more by mass consumers online, where they express (dis)liking a product or service. This motivation of sharing reviews has become more important compared to sharing expertise of social status.

In conclusion, this research showed that the connections between marketing variables and consumer online-posting behavior are distinctive at the early phases compared to mature phases when it comes to Internet usage. High prices increase the overall consumer review ratings, which may be good news for a firm’s pricing decision. They found that the search for status is a core driver behind consumer-review behavior, predominantly in the early Internet stage. In market where it is difficult to assess quality, costly to assess quality, and where heterogeneous tastes are important factors when choosing a purchase, customers are occupied in all-encompassing decision-making. These conditions make it more likely for consumers to request external opinions online, before they make a decision on what they will be purchasing.

References:

Chen, Y., Fay, S., & Wang, Q. (2011). The role of marketing in social media: How online consumer reviews evolve. Journal of Interactive Marketing25(2), 85-94.

Charlton, G. (2012) “Ecommerce Consumer Reviews: Why You Need Them and How to Use Them.” Econsultancy.com

Featured image: http://splumber.com/wp-content/uploads/2014/12/Plumbing-Online-reviews-1030×574.jpg

Can we start drinking beers all day long?


To cover the inevitable expenses of the Dutch student life, I worked as a online marketeer at a large beer brewery for two years. My main task was to maintain and manage the online community of the firm, which consisted mainly out of people that followed the company social media accounts. Within this online community I pushed content in the form of company posts towards our community members, posts with which I tried people to convince a certain product was attractive, or posts telling our people that our new campaign was cool. But what I did was wrong. Instead of my strong content pushing focus, I should have engaged our community in engaging..

In the last decade, the term “engagement” has been extensively used in marketing literature. But while this term has become more popular, it never has been really been defined or differentiated from terms as “participation” and “involvement”. So when Roderick Brodie and his friends (2013) decided to write an article about virtual brand communities, they choose to focus on the consumer engagement in these communities. What really defines this customer engagement, and how could this customer engagement be created?

They started with the question how to theoretically define consumer engagements, since this was never really done, and came with the following comprehensive definition: “Consumer engagement is an interactive, experimental process, based on individuals engagement with specific objects (e.g. brands, organizations), and/or their community members.” After defining this consumer engagement, they start examining what was needed to create this consumer engagement in online brand communities. A netnography (Dhiraj, 2011) was done were 427 blog posts consisting out of 56.804 words were analyzed. Eventually, Brodie et al. (2013) came to the following practical conclusion: companies must start “engage in engaging”, they must form their brand communities in such a way that consumer interaction determines what is happening.

But how should this “engage in engaging” be implemented by an online marketeer, for example myself? Can we stop working and start drinking beers all day long? Unfortunately that is not the case. By implementing this “engage in engaging” principle, the role of the online marketeer changes, but it does not disappear. Instead of following the traditional marketeer role and hereby pushing content towards community members, online marketeers should be responsible for creating an environment that lets the community members create and share content. Interactions between these community members should form the community.

This is because according to Brodie et al. (2013), the modern consumer does not want “sales talk” from a company account, instead it wants “non-commercially” driven reviews and comments from peer consumers. This may sound like the online marketeer should lose the entire control of their online communities, but that should not have to be the case. In the end, it is mainly important that the consumers perceive the community to be “non-commercially” driven. This causes for a new challenge for the online marketeer: creating environments that are being perceived to be controlled by the consumer, but that in the end cover subjects that engage customers to buy products or services from a company. If this is hard? Yes it is, and if you are not convinced, take a look at this McDonalds example:

(YouTube, 2015)

Brodie, R., Ilic, A., Juric, B. and Hollebeek, L. (2013). Consumer engagement in a virtual brand community: An exploratory analysis. Journal of Business Research, 66(1), pp.105-114.

Dhiraj, H. (2011). Open Business Council. [online] Openbusinesscouncil.org. Available at: http://www.openbusinesscouncil.org/2011/11/what-is-netnography-the-effects-it-places-on-the-web-and-social-media-industry/ [Accessed 5 Apr. 2015].

YouTube, (2015). #McDStories RUIN LIVES!!. [online] Available at: https://www.youtube.com/watch?v=Z0hh3M-EanA [Accessed 5 Apr. 2015].

Platform Based Banking


Based on: Tiwana, A., Konsynski, B., Bush, A.A., (2010) Research Commentary Platform Evolution: Coevolution of Platform Architecture, Governance, and Environmental Dynamics. Information Systems Research 21(4):675-687.

In the old days there was a clear distinction between customers and companies, but now this line is fading. Companies made products which customers bought and both parties relied on the expertise of the designers. It was a rather simple world that worked well for quite a while. But due to the internet everything changed. Suddenly companies were able to connect to customers in ways that were never thought would be possible. Control shifted from the companies to the customers and another group of ‘customers’ was born; developers. In order for companies to stay relevant, they needed to incorporate these new ‘customers’ in their business proces. By creating a platform ecosystem, companies are able to do this. The economy is changing towards a platform-based economy, where (two-sided) network effects are the main drivers.

Tiwana et al. (2010), explain a platform ecosystem as the extensible codebase of a software based system that provides core functionality shared by apps that interoperate with it, and interfaces through which they interoperate.  Screen Shot 2015-03-12 at 22.02.21

The modules are the apps running on the platform. A module is an add-on software subsystem that connects to the platform to add functionality to it (Sanchez & Mahoney, 1996). The lines called ‘Interfaces’ seen in this figure can be considered to be APIs. API is an abbreviation for Application Programming Interface. Software developers acces APIs as interfaces for code libraries, frameworks or sources of data, to free themselves from low-level programming tasks (Dagenais & Robillard, 2008). These interfaces I think are the gateway to the future. They allow companies to share data in a standardised way, on which developers can build their own ‘new’ products. Developers co-create value for the company. Entire businesses are build this way. Think of Netflix, Twitter and Google Maps.

I think the banking industrie will be the next industrie to gain from using APIs. When banks allow developers to co-create value, completely new services will emerge that banks have never thought of. In recent history Information Technology applications have created a lot of new possibilities for banks, for example the ATM (Automated Teller Machine), which led to a decrease in costs and an increase in added value for customers (Kamel, 2005). I believe APIs can do the same, if not more, to benefit the banking industrie.

References:

Dagenais, B., Robillard, M.P., (2009). Semdiff: analysis and recommendation support for API evolution. In: Proceedings of the International Conference on Software Engineering (ICSE), IEEE, pp. 599–602.

Kamel, S. (2005). The use of information technology to transform the banking sector in developing nations. Information Technology for Development, 11:4, 305-312

Sanchez, R., Mahoney, J., (1996). Modularity, flexibility, and knowledge management in product organization and design. Strategic Management. J. 17 (1), 63–76.

Tiwana, A., Konsynski, B., Bush, A.A., (2010) Research Commentary Platform Evolution: Coevolution of Platform Architecture, Governance, and Environmental Dynamics. Information Systems Research 21(4):675-687. 

Moving Towards a Craft-Consumer: The Example of AudioDraft


It is a fact that firms are constantly looking for new ideas and content that fit their specific needs. Therefore, not only consumers respond to customized solutions offered by companies, but the opposite can happen as well. The evolution of crowdfunding has allowed the creation of suitable platforms that connect individuals with firms within new contexts.

AudioDraft is an interesting case of such a platform. It allows anyone that needs a specific music or sound to crowdsource it to talented composers or music designers around the globe. The best analogy for what the startup does is 99Designs for sound [1]. What is the core of this idea? “The logic is to make things simpler for everyone. Customers can always know beforehand what their music budget will be and the designers can more easily understand the payment amounts they are expecting from the service”, says Arto Tolonen, co-founder of AudioDraft [2].

The company was founded in 2010 and within the first three years managed to create a community of about 20,000 musicians and composers that offer their music talents to clients or firms. This pool is balanced out by approximately 1,000 customers [3]. Nokia is one of the biggest companies that have used it in order to create a sound to go with its new devices. Initially, the only way offered to connect artists with companies was through competitions initiated by the latter (Open Studio). The platform charged 99$ fee per competition, in addition to 10% of the prize money. However, later AudioDraft created an online unique music store, where participants could upload their music, while customers have to pay them anything from 400$ to 2000$ for a license of a certain track (A&R). The last option provided is full access to the musician talent pool along with a full music production toolkit for 999$ per month (Agency Studio).

audiodraft-status-long

Each of the above revenue models correspond to a different level of customization and expertise for the required music. And while 1,000 customers might not seem a massive number, the average commission musicians gain per track is 1,200$, with AudioDraft gaining 10% of it. “There are artists on the platform who are making enough money to pay for their living costs” states CEO Teemu Yli-Hollo [1]. As for the goal of this crowdsourcing music company?  “We want to give artists other means to create and find distribution for their music than the old record label way, and to make crowd-sourcing music easier,” Yli-Hollo explains. Another interesting functionality included in the platform allows fans to have access to the actual production of a music track. “Imagine if an artist like Madonna would build a song online, giving fans access to hear the song as it is being written, having them comment the track and share the process of writing music,” Yli-Hollo suggests [4]. Could such ideas cause the next big disruption in the music industry?

AudioDraft is a perfect example of a firm that uses crowdsourcing to empower customers to create new products and even distribute them to other people or firms. Such cases show the unlimited potential of crowdsourcing. We have already looked into consumers customizing products that firms offer and the principles of this customization process [5]. Perhaps it is time to look into consumers creating custom products for themselves, from which they alone profit and through which they create a different kind of value for firms, not monetary. This is the next step as the market is moving towards a “craft-consumer”, one that brings skill, knowledge, judgement and passion while being motivated by a desire for self-expression in the process of creating a new product [6].

References:

[1] http://techcrunch.com/2013/07/17/audiodraft/

[2] http://www.goodnewsfinland.com/archive/news/audiodraft-launches-online-store-for-exclusive-audio-tracks/

[3] http://www.arcticstartup.com/2013/07/18/audiodraft-picks-up-e300000-to-grow-audio-sourcing-platform

[4] http://venturebeat.com/2010/05/24/audiodraft-gives-musicians-new-tools-for-online-worldwide-collaboration/

[5] Randall, Taylor, Christian Terwiesch, and Karl T. Ulrich. “Principles for user design of customized products.” California Management Review 47.4 (2005): 68.

[6] Campbell, Colin. “The Craft Consumer Culture, craft and consumption in a postmodern society.” Journal of consumer culture 5.1 (2005): 23-42.

Value co creation in beverage industry


the case of Coca-Cola and Heineken and the future of healthy beverages

The battle between companies and organizations to attract and keep their customers are become increasingly fierce. Co-creation design has been proved to be a potential market trend by the fast growing market volume of ideation contest, and the volume is expected to reach 5.5 billion euros in 2015 (Dervojeda et. al, 2014).

In beverage industry, there are already many successful business innovation attempt conducted by large companies. Two cases, which would be detailedly illustrated here, are Heineken and Coca-Cola.

Coca-cola utilizes crowdsourcing as a tool in its innovation strategy, combined with social media, Coca-cola harness the power of the Internet by making use of user-generated content. Cooperated with eYeka, the company started an online co-creation activity gathering ideas expressing its brand promise ‘Energizing refreshment’ in the forms of videos, photographs, animations etc. At the end, the company gets a vast amount of contents of high enough quality that could be use a future marketing campaign for Coca. The productivity was 9 times higher than that of single traditional means according to Leonardo O’Grady, who is Asia Pacific regional director for sparkling and activation platforms. But the cost is only a flat fee including tapping into the creative community, responding to any questions and the winner’s prize.

Heineken won Co-Creation Award in crowdsourcing category with its Open Design Explorations project in 2011. The project aimed to develop a relevant and impactful understanding of club design by understanding the needs of clubbers and co-creating a visionary nightclub concept to enhance the nightlife experience. To achieve this goal, 120 young clubbers are selected as participants in the consumer consulting board serving as the inspiration point for the designers, by sharing their previous experience in current-existing clubs, their opinions on clubs and ideal nightlife expectation and giving feedback on the designer’s draft sketches. At the end, the creative designers, the managers and the consumers cooperated build a live concept club space in Milan during the Design Week. Besides, in best-practice markets including Netherlands, the UK, Czech Republic and Poland, this project has led to a sales increase of Heineken of up to 40% (InSites Consulting report on Heineken, 2012).

Some healthy food and beverage marketing experts believe that consumer involvement is vital when developing nutritious and functional beverage brand concepts. Since when it comes to healthy categories products, a paradigm shift arises by nature. Traditional beverage paradigm was based on mass-production, while the key success factor of healthy-oriented trends lies on starting and ending with the consumers, requiring ‘local’ and ‘fresh’. To do this, beverage industry giant Coca-cola, as a soft drink brand, acquisites Innocent to accomplish ‘healthy’.

The action taken by Coca-cola also reveals the fact that healthy beverages is not a standing still category, instead, it is evolving and tends to reach “a state of fusion”. But no matter how it is evolving, the essence is blending healthy beverages market from different categories to meet consumer’s demand for healthy, so the core value is customer’s needs. That’s why healthy beverage might have a bright future in co-creation design.

References:

Design for Innovation, Co-creation design as a new way of value creation, Business Innovation Observatory

http://www.beveragedaily.com/Markets/Marketing-guru-Consumer-co-creation-key-to-healthy-drinks-development

http://www.innovationmanagement.se/2012/02/24/five-co-creation-examples-e-on-coca-cola-mtv-tata-group-and-heineken/

http://brandgenetics.com/cool-co-creation-examples-heineken/

https://www.marketingmag.com.au/hubs-c/case-study-heinekens-nightclub-of-the-future-co-creation-project/

consumer can be creative for co-creation


Nowadays, the word “co-creation” is becoming the new trend in business and product development. Varying from other meanings, in this case, the consumers act as another partner who perform in the creation of value as well. With the arise of the social media, “co-creation” is getting more attention from companies as an option to distinguish themselves from the others.

At the very beginning, the process of value creation was almost driven within the business itself. To be more specific, all activities like product design and production, creation of marketing messages, could be performed within the business without any consumer input. in these days, consumers are not creative as seen as the last point of consumer interaction, rather than during the process of value creation.

The definition of consumer value is the difference between the perceived benefits of the product or service, and the cost of that product or service. However, this definition cannot be really helpful as how value is actually created. Base on the defining words of Austrian-Hungarian economist and Harvard University lecturer Joseph Schumpeter in the 1950s – “One does not make a difference unless it is a difference in people’s lives” – management is in the dilemma as well to come up with the exact role of the consumer in order to perform best delivering to ‘making a difference’.

Recently, the growing acceptance of co-creation has changed the role of the consumers in the creation of value. IKEA is one the them. IKEA, one of the biggest multinational furniture retailer from Sweden, gains the benefit of co-creation by having customers provider their own assembly operation. On the other hand, the executives of BMW have realized Mini with new development that significant mileage can be gained by tapping into the collective experiences and creativity of consumers all over the world. Nowadays, most of the Mini owners choose to co-create a car with their own specification in order to be unique. Last but not least, Amazon also benefit from the co-creation by encouraging reader to write product reviews for other customers. in this way. The new customers could view the review first then decide whether to buy it or not. And it somehow increases the attention from more potential customers.

The new acceptance of co-creation for consumers has added a new dimension to improve the relationship between company and consumer by engaging consumers directly in the production and distribution of value. However, the interaction of companies and consumers, on the hand hand, also play an important role on the process. This interaction can take place anywhere within the business operation, not only happens at the point of sale, but also in the research sessions which can provide an ideal time to explore value creation.

Besides, many companies start to use social media website to develop co-creative initiates as well since it is more convenient for consumers to voice their views and opinions on social platforms. However, it is not enough for a true co-creation process. In order to work effectively in the co-creation process, the customers should place themselves as the same level of importance as the company, and the process should also starts with access and transparency.

Reference:

http://www.innovationmanagement.se/2012/03/26/innovation-through-co-creation-consumers-can-be-creative/

Willing to pay for quality personalization? Trade-off between quality and privacy


A trend in the e-commerce business is web-shops giving personalized recommendations to their customers based on past purchasing behaviour or browsing history. Research shows that personalized recommendations can affect online sales with a 12% in average order value for personalized transaction.
A major concern of consumers related to personalized recommendations are the privacy concerns that people have with companies using their private date. The privacy-personalization paradox occurs: People resent that their personal information is used by companies to personalize their services, but also would like to benefit from this personalization. The privacy calculus theory suggests that people will make a calculation in their head if the loss of privacy they perceive will result in more benefits of personalization.

The paper I will discuss today is written by Ting Li and Till Unger in 2012 and explored the relationships between personalization quality and privacy concerns through the privacy calculus theory. They conduct an experiment in combination with a survey in which they show people 8 different scenarios. The scenarios were webpages with different dimensions manipulated. They have chosen for a 2x2x2 between-subject design and manipulated three dimensions namely: privacy, quality of personalization and industry domain.
The findings of this research are very interesting. The authors found that a customer’s intention to use online personalization is negatively influenced by the degree of her privacy concerns.  Prior research has argued that privacy concerns play a crucial role in customers’ online purchasing behaviour. The results of their experiment support this hypothesis. They found that the familiarity with online personalization reduces this negative effect of privacy concerns on the intention to use the personalization system.
Also the quality of a recommendation system is researched in this paper. This is the first research on recommendation agents that take quality as a variable. The quality of a recommendation agent seems to be an important factor in the likelihood of using online personalization. When consumers perceive the quality of the recommendation agent as high they are more likely to use the personalized recommendation agent. They also found that higher personalization quality could overcome customers’ privacy concerns.

This research is very important for e-commerce companies. For managers of these companies the information privacy concerns that consumers have are important to notice. Personalization systems that have high quality are very beneficial for their company. They need to build an e-commerce site that creates trust and addresses the information privacy concerns of users. This research shows that using privacy signs can ease the privacy concerns of users. This research also suggests that it is important that a site already established a good relationship with their users before implementing personalization services.

The Few and Far Between


Co-creation or consumer participation is a concept that reminds us of customers that help creating a product for a company. Take for example Lays or Nike. Their customers help in creating a unique pair of sneakers or selecting the taste for the weirdest flavors for their products.

But not all companies wish to create a new or innovative product, some companies just want to engage consumers with their brand. This can be done by starting a multimedia campaign for example. To make this work, you don’t necessarily need creative consumers. In the case of Jack Daniels sharing some of your favorite drinking stories will do!

Jack Daniels started a campaign called ‘The Few and Far Between’ in September 2014. For this campaign they had to search for people that had a great story to tell, so that they could post them on the website. When entering the website you can view 7 videos, listen to 11 audio stories or read on of the 6 written stories that consumers of Jack Daniels have posted. More stories will be added later this year. By engaging their consumers, Jack Daniels is creating a virtual gathering place where consumers can share their greatest drinking stories with the world.

The marketing team behind this concept argues that Jack is a brand that is rich in storytelling, and that is therefore makes perfect sense to find good bar stories all across America. In total the team has heard over a 1000 stories, but they only picked the best ones to be posted on their website.

Although this campaign might seem a bit unconventional, it could very well turn out in a great success. As mentioned on their website, people love drinking stories. So it is not that strange that the producer of the best selling whiskey in the world decided to create this platform. And by engaging their customers, Jack Daniels makes sure that they maintain the increase in their brand value (and  21 years of consecutive growth).

Oh and by the way, to avoid stimulating people to drink excessively they made a disclaimer that says: ‘You can’t tell a story you don’t remember. Please drink responsibly’.

Sources:

http://adage.com/article/digital/bar-talk-jack-daniel-s-gathers-stories-digital-campaign/294780/
http://barstories.jackdaniels.com/
http://www.adweek.com/news/advertising-branding/how-jack-daniels-searched-all-over-country-best-bar-stories-160166
http://www.bestglobalbrands.com/2014/jackdaniels/
http://www.designcue.com/case/jack-daniels/

Corporate Brands From an Open-Source Perspective


In this blog post I will describe the most interesting theoretical and practical elements of the paper ‘The penguin’s window: corporate brands from an open-source perspective’ by Pitt, Watson, Berthon, Wynn and Zinkhan (2006), which relates to session 3.

The traditional New Product Development (NPD) model, where companies are exclusively responsible for coming up with new product ideas, is increasingly being challenged. For instance, innovative success stories of Open Source (OS) projects suggest that customer empowerment makes sense economically. This customer empowerment affects internal NPD processes (companies more actively and directly integrate customer ideas about new products), but also how companies are perceived in the marketplace.

The article introduces an OS lens to review traditional corporate brands. The term OS originated in computer programming, ‘in which a program’s source code is open to view and modification, and there is no charge to download and use the program’. Nowadays the term is used to describe movements that have similar philosophical underpinnings to OS software (e.g. Wikipedia). OS brands have been created in nontraditional ways at minimal cost and thus challenge accepted knowledge of brand building and maintenance. It is important for traditional marketers to understand that organizations behind OS brands do not behave like their traditional competitors. They do not compete in the same way, do not produce their offerings in the same way, are frequently difficult to monitor, and are mostly not motivated by the same financial incentives as traditional branded sellers.

Historically, power and control were centralized and hierarchical with corporations: the producers produced and the customers consume. However, OS decentralizes power and control and makes it heterarchical: producers and consumers are merged into ‘prosumers’. Thus, companies should rethink how to respond to customers becoming its coproducers, its collaborators and its competitors.

Therefore the authors came up with sources of an OS offering (physical, text experience and meaning) and considered these in terms of ‘open’ and ‘closed’ dimensions (figure 2). Interestingly, the authors state that ‘even the most traditional corporate brands are not as closed as managers may think’.

fig 2

A brand’s meaning cannot be solely determined by the corporation, e.g. the meaning of the Harley-Davidson brand is largely determined by the type of people who drive the motorcycles.

Corporations want to direct appropriate experiences in their offerings. According to the authors there is an ‘experience economy’, wherein the participation of the consumer is actively sought and cultivated to create the brand experience (e.g. in Disneyland).

The rise of fast processors and adaptable interfaces has fueled the rise of interactivity, in which text (stories) become partly open and shaped by readers.

The physical aspects of a brand offering have traditionally been closed and determined by corporations. As discussed in class, there has been a rise in mass customization and nowadays in cocreation of physical products.

Using this framework can help to revision corporate branding towards an open perspective wherein prosumers create the physical offering, author the text, generate the experience, and evolve the brand meaning. This results in a loss of organizational control over the brand.

The authors view OS brands based on the social capital theoretical framework and a specific form of ‘gift economies’, where goods and services are given to others with no reciprocal obligation from the recipients (e.g. creativity, innovation, and development services provided by members). Conversely to economic capital, the more one gives away, the more symbolic capital one accumulates in the form of prestige, status, and reputation.

 

References

Fuchs, C., & Schreier, M. (2011). Customer empowerment in new product development. Journal of Product Innovation Management, 28(1), 17-32

Pitt, L. F., R. T. Watson, P. Berthon, D. Wynn, and G. Zinkhan. 2006. The penguin’s window: Corporate brands from an open-source perspective. Journal of the Academy of Marketing Science 34 (2): 115–27.

Co-creation in the online fashion world: Modcloth


Co-creation at the apparel company Modcloth can be the future for all apparel companies. They incorporated “Be the Buyer”. Customers can be a virtual member of their Fashion Buying Team by telling them which designs they love. Modcloth will show several designs and the customers can vote for their favourite design. When a style gets enough votes, the design will be sewn and sold by Modcloth. If the item is produced the customer will get an e-mail telling this, so they can be first to buy it and wear it.

Screen_Shot_2014-05-13_at_12.09.08_PM

For a small company like Modcloth, this approach can be the key for success. They can be absolutely sure that the design the customers choose will do well in the market. This way they do not have to make big inventory commitments without knowing if the customers will love the design and buy that piece of clothes.

They recently introduced Sneak Peek. With Sneak Peak they involve customers by asking them to let the company know what you want to wear next season out of clothes that are going to by sold by Modcloth. Modcloth can decide how much to produce and how much they will need to have in stock. So this also reduces inventory costs, and the products are better fitted for the customer needs. It is safe to say that they can better forecast supply and demand for specific items than other regular companies.

But they are taking co-creation to an even higher level with its “Make the Cut”. With this program users can sent in their sketches, and people will vote via Be the Buyer. The best sketch will be produced and sold. The winner will receive the winning piece, along with $500.

So will this be the future of the fashion industry? I think, for smaller, online, fashion stores it is. They can be sure that their clothes are appreciated by a large customer group, and already have potential buyers. The latter, in combination with the fact that inventory costs will be reduced as much as possible is the key to success in this business. The value of co-creation at this company is enormous and this will only grow. So I suggest other online apparel companies will look further into co-creation and use this business model as well. The most beautiful part is that your customers will select the clothes they like the most and that it will most likely reduces cost and gains revenue.

A small note here is that this co-creation system of Modcloth is not the large part of the company, the company itself does most of the buying process. However, it is important for any company to engage customers and I think co-creation and decision making by customers is the best way to do this.

http://www.fastcompany.com/3003448/when-co-creation-becomes-beating-heart-marketing-companies-win

http://www.modcloth.com/

A closer look at CustomMade.com


In an earlier post, CustomMade was introduced as a platform for the generation C, the generation of co-creation, to connect the artisans with customers looking for products made just for them.

As a DIY enthusiast, but not really an active contributor to the maker community, I decided to take a closer look at how the customization process works. I wanted to see how easily I could get started with creating my own product and how involved would I be with the creation of the product. Equipped with the theories covered in the course I closely examined the site through a sample purchase. The website only ships to the US currently, so I did not follow through the entire process, but focused on how a new customer could experience the site. I recently bought a phone that does not have a wide selection of cases made for it. So I set out to see if I could get one made that would fit a couple of cards from my wallet.

When arriving on the website I was given a clear overview of the two main options I have. I had the option to Shop the products on the homepage by either scrolling down or going directly to a category from the top menu bar. The page displays featured categories, followed by selected products labelled as existing designs. As a first time user these categories were quite generic; with his and hers categories in the form of pendants and cufflinks, as well as household goods such as desks and lighting. Over time I did not notice any change to these categories and it did not appear that they would be using any product recommendation agents to deliver these categories. It was much like any other regular online store selling these products, only that the pricing was only given as a starting point (eg. $130+ for a set of initial cufflinks).

The existing design products could be seen as starting points to the customization as outlined by Hildebrand et al. (2014), but the products displayed on a page do not reveal easily which of them are truly customizable. As it is often unclear how customizable a product is, it lengthens the search time rather than reducing it. Some of the products offer no customization or personalization options. Others offer only personalization using for instance engraving and some are simply products for sale with size options expected from any traditional online store.

There is a striking difference between this homepage and the one of Etsy, another handmade goods marketplace. Etsy relies on social media and collaborative filtering to bring recommendations to the forefront. They also highlight not only the creators of the products, but the people who have added the products into their Pinterest-like boards. On CustomMade it is unclear if the existing designs they promote are actual designs purchased and designed together with customers or simply handmade products. I found the product descriptions with details on how the design choices were made with specific customers and for what uses to be the most valuable insight into the customization process.

In the only phone related category, the iPhone case category, I couldn’t find a suitable case for my phone. Surprise, surprise as it’s not an iPhone. I went for the second option on the homepage, the start from scratch option where I can start a project by posting a job for a product. Creating a project involves filling in a form based on the product category selected. For the most popular categories, the user is displayed an attribute-based form, but with visual aids to assist with the selection and short descriptions. There is also the possibility to add photos or sketches to assist with visualizing the intended design. When I selected to create an iPhone case, I had to choose the Other category as it was not provided as an option. I could specify the size of the product I wanted, the budget and the materials and provide additional description. Suggestions were provided next to the fields to assist with defining the product, but they were not helpful in any way. Many of the provided categories also showed the same options. Not very relevant, as it is unlikely I would purchase a wallet that seats 8 people or has metal legs.

Attribute selection
Attribute selection for dining table
CustomMade001
A wallet seating 8 people

At this point I turned to the product buying guides prepared by the platform to see if I could find some further help. On all pages it is also possible to be in direct chat contact with the platform’s customer support. The buyer guides were helpful in approaching the different needs customers may have when purchasing a custom product, but lacked any of the great examples I read in the product descriptions. I thought it would be helpful to see snippets of or quick links to these use cases when trying to describe a job, as the attributes can confuse a novice user like me.

There were no guides for creating a phone case, so I decided to end my search for the day. Overall, CustomMade impressed me with the variety of products that could be customized through their platform, but at the same time was disappointing in the experience and support in creating the initial customization request. The starting solutions provided did not alleviate this complexity as the level of customization varied across the products. I would love to see a filtering option for the customization level to see the products I can contribute to the least amount and ones where I can take a more active part in customizing the product. I’ll definitely be back to the site if they ever launch in Europe. Do you know any sites that offer the same service in Europe at the same scale?

CustomMade
Etsy
Christian Hildebrand, Gerald Häubl, and Andreas Herrmann (2014) Product Customization via Starting Solutions. Journal of Marketing Research: December 2014, Vol. 51, No. 6, pp. 707-725.