A review of the article “The Value of Marketing Crowdsourced New Products as Such: Evidence from Two Randomized Field Experiments.” by Nishikawa H., Schreier M., Fuchs C. and Ogawa S (2017).

Maybe you have realised it yourself; in just a few years, nearly all muesli bars in your local supermarket have been labeled as organic. Or when you are standing in front of the twenty different pastas offered, your eyes are immediately drawn to the most italian named and looking packaging. Of course, these are marketing tools, used to show a certain quality and lure you into buying this product. The next new marketing buzzword, as identified by Nishikawa et al. (2017), might very well be customer-ideated.

Most prior research is focussed on the positive effects of wisdom of the crowds and how the customers know the pains and gains of a product best (Garcia Martinez & Walton, 2014). In this paper, Nishikawa et al. (2017) pay attention to the psychological value of crowdsourcing product development and the potential positive effects of marketing on sales.

Crowdsourcing: Objective vs. Psychological Argument

The research question the authors ask themselves is how customers perceive crowdsourced new products and whether the inferences they make affect their product choices. Quite some research has been conducted on the objective arguments of crowdsourcing new products (Bayus 2013; Poetz and Schreier 2012; Stephen, Zubcsek, and Goldenberg 2016). The general finding is that crowdsourcing can lead to promising new ideas. However, this can only happen under certain conditions. As such, there should be a necessary match between user expertise and design task complexity. Next, the size and composition of the crowd plays an important role. In comparison, the psychological argument which makes this research paper unique, argues that “customer-ideated” should be used as a cue that sells. Specifically, the authors predict that actively marketing the source of design can increase the product market performance. This because of if-then linkages between information users pick up and conclusions.

To test this prediction in the real world, the authors conducted a field experiment. By labeling crowdsourced new products as “customer-ideated”, the effect on the product market performance increased by 17%. However, the experiment holds some limitations. Namely, the sample size is too small, and only one product type is used. Therefore, the authors test their prediction in a second field experiment, using two product types and a larger sample size. Moreover, the authors wanted to test if the effect of “customer-ideated” is not because of more specific information on the product display. Again, the effect was positive.

After having established their findings in the real world, the researchers wanted to validate the results and performed two control studies. The first study had the aim to verify if it was actually the customer-ideated cue that caused the increase in sales. This study consisted of an online customer survey in Japan in which participants were randomly assigned to a few different conditions. They were asked which of the two products they preferred and had to explain the reason for their preference. The outcome  of this control study further strengthens the conclusion found in the field experiment, namely: consumers prefer crowd-sourced new products, if recognizable as such, because they infer these products to be 1) of higher quality and 2) better at addressing consumers’ needs.

The aim of the second control study was to measure the quality inference of consumers. It consisted of a control test in Europe in which participants were randomly assigned to either right or wrong information about the source of ideation. As a result, the participants chose the product labeled as ‘customer ideated’ more often and labeled this product as having higher quality. This outcome confirms earlier findings; products that are labeled as ‘customer-ideated’ are believed to be better because they are more useful to customers and more effectively address their needs.

My thousand dollar (customer-ideated) designer bag

The article has a new take on the use of crowdsourcing for product labeling to create marketing advantages. The fact that this has been studied in different environments, adds to the prove that the effect can be observed for certain products. However, the question remains whether this still applies for other product categories such as luxury brands and high-tech products. For luxury brands, such as Louis Vuitton, customers pay a high premium for exclusively designed products. A label inferring that customers designed the product might lower the value of the bag as the designer him or herself did not put its ‘magic touch’ to it. Furthermore, for high-tech products, consumers might not have the right knowledge to make valuable contributions to the product development process. Therefore, a label indicated the customer contribution might indicate lesser value to other customers who do not feel like their peers can grasp the complexity of the product to design it (Schweitzer et al., 2012).

How about business operations?

The results of the research point out a 17 percent growth in sales, which indicates that it is worthwhile investing in labeling your products as crowdsources. Nonetheless, the results might be offset by the increase in operational costs of including customer in the ideation process. Whether costs of including the customer into the process are higher (additional steps in the process) or lower (lower investment in designers) is not included in the research. Therefore it is not known whether the 17 percent increase is high enough to cover potential costs.

A future of customer-ideated products

Considering how these results will influence what our future would look like is not that easy. However, logically if the effect is positive, more and more producers will start labeling the product as customer-ideated. Once it becomes more common, the uniqueness effect might be lessened, cancelling out the increase in sales. In this scenario, the way of putting the message will become increasingly important for producers to differentiate in the looks of their product. This includes using different wordings and color palettes to avoid sameness. And who knows, once all products are labeled as customer-ideated, the label designer-ideated might conquer our hearts.

References

Bayus, Barry L. (2013), “Crowdsourcing New Product Ideas over Time: An Analysis of the Dell IdeaStorm Community,” Management Science, 59 (1), 226–44.

Garcia Martinez, M., Walton, B. (2014), “The wisdom of crowds: The potential of online communities as a tool for data analysis” Technovation, 34 (4), 203-214.

Girotra, Karan, Christian Terwiesch, and Karl T. Ulrich (2010), “Idea Generation and the Quality of the Best Idea.,” Management Science, 56 (4), 591–605.

Poetz, Marion K., and Martin Schreier (2012), “The Value of Crowdsourcing: Can Users Really Compete with Professionals in Generating New Product Ideas?” Journal of Product Innovation Management, 29 (2), 245–56.

Stephen, Andrew T., Peter P. Zubcsek, and Jacob Goldenberg (2016), “Lower Connectivity Is Better: The Effects of Network Structure on Redundancy of Ideas and Customer Innovativeness in Interdependent Ideation Tasks,” Journal of Marketing Research, 53 (April), 263–79.

Schweitzer, F. M., Buchinger, W., Gassmann, O., & Obrist, M. (2012). Crowdsourcing: Leveraging Innovation through Online Idea Competitions. Research-Technology Management, 55(3), 32–38.