Community pricing and product discovery: looking into Massdrop


Community first, that is the motto of online purchasing community Massdrop. Through that community, Massdrop and its customers determine the future strategy of the company. Massdrop was founded in 2012 and is an online retailer that specializes in letting its users buy products together.

Business Model

Massdrop’s business model is based on the principle of bulk purchasing power. Users of their website can subscribe to certain “communities”, such as watches, writing equipment, sound equipment or clothing. Within those communities, vendors offer specific products related to those communities for a limited time. These product offerings are called “drops”.  Massdrop users can then commit to purchase the product in that time, joining the “drop” of that product. There is a minimum number of users that needs to commit before a drop actually takes place. Furthermore, once a drop hits a certain target of users that committed to the product, the price is lowered for all consumers. Users can also submit requests for new products to be sold within the community.

 

This surmounts into two distinct advantages for Massdrop. They use the scale of their communities to ensure a minimum sales volume when a vendor sells their products via the Massdrop website. In return, the members of the community receive a discount on the regular sales price.

For every transaction that occurs through Massdrop, Massdrop takes a transaction fee. This fee constitutes most of Massdrop’s revenue. Massdrop also helps design and co-release certain products in collaboration with their top vendors, taking an even greater percentage on those sales.

To summarize, their value proposition in based around a common information strategy principle and two unique selling points.

  • Market making: facilitating product purchases through a platform
  • Price leadership: Offering unique price discounts for their communities
  • Sales Guarantee: A guaranteed minimum number of purchases for their vendors

Value co-creation

Massdrop’s entire business model is based around value co-creation. The company not only utilizes consumers for their purchasing power but also involves them in company decision making. Consumers can actively decide which new products Massdrop should try to get offered via the platform. This is also valuable for Massdrop, as it can gauge which products are in high demand. Using the value co-creation framework of Saarjärvi, Kannan & Kuusela (2013), Massdrop’s specific value co-creation elements can be determined.

 

  “Value” “Co” “Creation”
Customer (business partner) Customer benefit: Price discounts on products that they always wanted to purchase and unique items in the form of Massdrop exclusives Use of firm resources: Direct communication with Massdrop employees integrating decision making Integration mechanism: Through polling tools and customer forums.
Firm Firm benefit: The ability to offer vendors a guaranteed sales volume and the ability to determine beforehand which products consumers will like Use of client resources: Client commitment and client opinions to successfully attract new vendors to the platform Integration mechanism: Trough notices of purchase intent, textual feedback and product votes

 

Massdrop is a great example where value co-creation is used to gain unique advantages over completion and offer consumers direct ways to interact and participate whithin a company.

Further reading

Hannu Saarijärvi P.K. Kannan Hannu Kuusela, (2013),”Value co-creation: theoretical approaches and practical implications”, European Business Review, Vol. 25 Iss 1 pp. 6 – 19 Permanent link to this document: http://dx.doi.org/10.1108/09555341311287718

https://www.massdrop.com/

https://www.massdrop.com/about

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