Nexar – Business case


Making the road safer by using the crowd

Nexar was founded in 2016 by Eran Shir and Bruno Fernandez-Ruiz, two former employees of Yahoo (Tilly, 2016). To develop this application, they have raised 44,5 milion dollars in three founding rounds. The company provides a mobile application that turns your mobile phone in a dashcam that is connected in a vehicle-to-vehicle network (MacVie, 2018). The main focus of the application is making car driving safer and this can be seen as a real need as almost 1,3 million people worldwide die of car accidents (Kouwenhoven, 2018). 

How does it work

All Nexars users are connected in the Open Vehicle Network. By using AI dashcam functionalities Nexars application is able to record the surroundings and identify for example traffic signs, road signs, other drivers, pedestrians, etc. By analyzing this information with algorithms insights can be provided about traffic patterns and infrastructure. All this data is of course anonymized and other parties can subscribe for usage of this data (Nexar, 2019). Nexar also launched ‘City Stream’ in 2017 which by enough users can optimize driving routes, identifying driving infrastructure and finding available parking spots which all together makes a city and driving safer (Nexar, 2019). The Nexar application can therefore be seen as a two-sided platform at on the one hand the drivers that use the application and on the other hand 

Value for multiple parties 

The main focus of the application is to make driving safer by communicating real-time warnings about dangers to prevent accidents (MacVie, 2018). Moreover, when an accident happens Nexar provides her drivers with a detailed collision report including video and images about the accident. Not only for insurance can these recordings be useful, but also for example when somebody cannot communicate what happened to due to injuries. Besides these advantages for individual users it also provides valuable insights for city planners and managers to use for roadway maintenance and infrastructure- and traffic management. Especially, areas that are prone to incidents are important to be identified, so these areas can be redesigned and further accidents can be prevented. Furthermore, third party developers of ridesharing applications can take advantage of this real-time data to improve their applications. Besides the value of all the parties making cities safer benefits all citizen (Nexar, 2019). 

Crowdsourcing 

Besides these application Nexar also makes use of crowdsourcing for finding solutions for problems they face in which people can become co-creators. They have organized for example a competition to find a solution that the Nexar app can recognize the traffic light state in images (Brailovsky, 2017). Another challenge was detecting cars on diverse datasets around the world (Nexar, 2019). These crowdsourcing competitions could also form a new business model for them, as many of these challenges are interesting for companies that are developing autonomous driving as well. Besides the advantages for the company itself it challenges people to find solutions and motivates them to participate in these challenges. In the first challenge the participants were provided with a training and test data set and had two months to come up with a solution. The participant that won the competition got 5000 dollar (Brailovsky, 2017) and moreover the top 5 participants were invited to present their ideas and also invited for an interview that could lead in a job offer at Nexar’s Deep-Learning Team. So not only money was used as an incentive, but also acknowledgement plays a role in the success of the competitions. Also there is a leaderboard to motivate people to participate and the challenges are mentioned on the website of Nexar, so everybody can see who the winners of the challenges are. At this moment there is no competition, but people can subscribe to receive an email when a new competition starts (Nexar, 2019). 

Challenges for Nexar

Challenges that Nexar faces can be that also more accidents occur, because of the use of mobiles in the car. It could be said that instead of warning the drivers for dangerous events it can evoke dangerous situations as the drivers are paying more attention to the application then to the road, this also is an issue with the Uber drivers. Another challenge could be the many other applications that provide optimal routes, parking spot availability and information about traffic jams. Also it is a challenge to have enough users to collect enough data and create valuable insights. This also has to do with network effects, as there should be enough users to attract more users, but also to attract application developers and other parties that like to invest or buy the data. 

Future implications

At this moment Nexar has a very good working business model, but they could develop this business model further. By for example connecting their network to emergency services, so when an accident happens these services are immediately warned. Also their route could be optimized using Nexar traffic data. Another option to develop their smart city solution further is to expand it to public transport. By also collecting data of this area a complete picture of the traffic flows can be provided to city planners and managers, but also people can be provided with advice which transports is the best choice to a specific location. As I mentioned before it would be very valuable to become more of a crowdsourcing platform also for competitions like the two, they have organized before. Especially, for this area and thinking about autonomous driving there are a lot of challenges that we are still facing. Another area of interest could be working together with insurances companies, as with the recordings drivers can prove that they always drive the right speed and follow the traffic rules. All with all in my opinion there are enough possibilities to expand this application.

References:

Brailovsky, D. (2019). Recognizing Traffic Lights With Deep Learning – freeCodeCamp.org. Retrieved from https://medium.freecodecamp.org/recognizing-traffic-lights-with-deep-learning-23dae23287cc

Kouwenhoven, E. (2019). Wereldwijd sterven 1,3 miljoen mensen in het verkeer. Retrieved from https://www.ad.nl/auto/wereldwijd-sterven-jaarlijks-1-3-miljoen-mensen-in-het-verkeer~a9a15e46/

Macvie, C. (2019). 5 Cool Crowdsourcing Platforms You Should Check Out. Retrieved from https://www.fulcrumapp.com/blog/crowdsourcing-apps/

The Nexar Challenge. (2019). Retrieved from https://www.getnexar.com/challenges

Tilly, A. (2019). This App Turns Your iPhone Into A Dash Cam With Machine Vision. Retrieved from https://www.forbes.com/sites/aarontilley/2016/02/12/this-app-turns-your-iphone-into-a-dash-cam-with-machine-vision/#5d2206a41912

Activist Choice Homophily and the Crowdfunding of Female Founders


An infamous adage states “Birds of a feather flock together”. This implies that individuals favor other individuals that are similar to them. This not only applies to one’s personal life, but also to his professional one. As such, with this logic in the workplace people should try to help and promote others that share identical traits to them.  However, is that truly the case? Cohen, Broschak & Haveman, (1998) conclude that when women are numerous in higher-level position, promotion for other women is less likely. The researchers argue that the women managers do not feel the need to push for the advancement of their women subordinates. What motivates such a behavior?

Greenberg & Mollick (2017) chose to investigate this question by further researching homophily and more specifically its underlying mechanisms. The authors defined homophily as the “tendency of individuals to associate with others based on shared characteristics”. While homophily had previously been researched, the underlying causes behind the phenomenon were still unclear. The researchers distinguished between two kinds of homophily: induced and choice homophily. On the one hand, induced homophily is a result of homogenous networks that perpetuate themselves. Thus, the offered opportunities of interaction, such as schools for instance, are homogeneous and led similar individuals to associate with one another (Kossinets & Watts, 2009). Greenberg & Mollick (2017) were interested in researching choice homophily, which according to Kossinets & Watts, (2009) is more related to individual preferences and choices we make as a result. However, Greenberg & Mollick (2017) argue that choice homophily can in fact be further divided into two different constructs that would explain the conflicting results in previous research concerning homophily.

  • Interpersonal choice homophily operates on a personal level and implies that the affinity for similar people is linked to our notion of self-love.
  • Activist choice homophily operates on a group level and implies a certain solidarity facing shared structural barriers that arise from a common social group identity, and a desire to overcome such obstacles.

In order to focus on choice homophily, the researchers decided to conduct their studies in the context of crowdfunding. Indeed, induced homophily is reduced in two ways in this environment. Firstly, there is no formal gate keepers, unlike in venture capitals, and anyone can support a project thus making the opportunities for interaction heterogeneous. Secondly, Internet does not limit the environment in which people interact, which gives them broader choices in terms of who they wish to support.

Various elements motivate individuals to fund projects, such as a philanthropic behavior for donation-based crowdfunding. Nevertheless, it is important for individuals to be aware of their unconscious biases in order to make choices that they truly support. Why did I choose to fund this person’s project? Was it solely based on the project itself or did his gender impact my decision?

To find evidence for their newly defined activist choice homophily, Greenberg & Mollick (2017) conducted two tests. The first one was a laboratory experiment. 399 students at two private universities in the Northeastern US participated. A technology project that had been successfully funded in Kickstarter was chosen, as it is an area in which women are underrepresented and therefore portrays a group-level disadvantage appropriate to test for activist choice homophily. Furthermore, measures were taken to mimic real life circumstances. As such, key crowdfunding aspects such as a description, that are also antecedents for success, were added. The only two manipulated elements were the name and the picture of the founder as they portrayed his gender. The design of the experiment was a 2 (founder gender) × 2 (participant gender) design. That entails that half of the women participants were perceived the founder as the same gender as them and the other half saw him as a male. The same conditions applied for male participants. Several measures were taken to avoid possible cofounds when manipulating the picture and name. Different components measured the both types of choice homophily as well as one’s support for a funder. For instance, respondents were asked how much of $1 they were willing to donate to assess the latter.

A field experiment was then conducted with data on 1,250 Kickstarter projects from 5 categories:

  • Two predominantly male (gaming and technology)
  • Two predominately female (fashion and children’s books)
  • One more balanced between both genders (film)

Restrictions were imposed on the sample, such as eliminating projects that sought less than $5,000. Control variables were defined to assess whether key Kickstarter aspects, such as whether a project was featured, biased the results. Robustness checks were also done to check the scales.

The main results of this study are the following.

  • Results from both the laboratory and field experiments were consistent in showing that women were more likely to fund other women’s projects, as interpersonal choice homophily would suggest (results for men were inconclusive).
  • Female founders in technology are more likely to reach their goal, as they face disadvantage because of their gender which is consistent with activist choice homophily

All in all, this research not only explored a subject that had not been properly researched (aka the underlying mechanisms of homophily), it did so in a very thorough manner. Thus, the results found in the laboratory experiments were confronted to those collected later in the field experiment. This approach guaranteed that the conclusions found were of high external validity and thus were applicable in real life. Moreover, control variables were used to make sure activist choice homophily was responsible for the effect that was observed on donations and funding decisions. In addition, robustness checks were conducted to test the scales.

In conclusion, this paper is not only relevant for consumers to better understand the unconscious motives behind their choice. It also concerns managers. Indeed, implications of this research go beyond a crowdfunding context. Even though the interaction that induced homophily would have with activist choice homophily is tough to assess, the latter also has a role to play in more traditional funding processes, such as a venture capital and even in a workplace in general. As such, to fight against women underrepresentation in technology, the solution has been to increase the proportion of women in related entrepreneurships and venture capitals. Nevertheless, with the concept of activist choice homophily, it appears that activism has an important role to play as well in breaking the constraints women face in such a field. As such, efforts in representation of women should be continued. However, it should be complemented with initiatives to increase identification, mutual support and activism for the individuals of unrepresented groups.

“One for all, all for one!” (Dumas, 2018)

  • Cohen, L., Broschak, J., & Haveman, H. (1998). And Then There were More? The Effect of Organizational Sex Composition on the Hiring and Promotion of Managers. American Sociological Review, 63(5), 711. doi: 10.2307/2657335
  • Dumas, A. (2018). Three Musketeers, The. La Vergne: Dreamscape Media.
  • Greenberg, J., & Mollick, E. (2017). Activist Choice Homophily and the Crowdfunding of Female Founders. Administrative Science Quarterly, 62(2), 341-374. doi: 10.1177/0001839216678847
  • Kossinets, G., & Watts, D. (2009). Origins of Homophily in an Evolving Social Network. American Journal Of Sociology, 115(2), 405-450. doi: 10.1086/599247

The Future of Parenting


Owlet’s Smart Sock

As a parent, the ‘’health management’’ of your children is a time-consuming and stressful occupation. Especially due to the fact that infants cannot express themselves verbally, which often confuses parents. This is where digitalization could lend a helping hand. New possibilities are helping parents to understand the needs of their infants. One of these possibilities is the Smart Sock. Kurt Workman is the CEO of a baby-care company named Owlet.  When starting a family, he had some concerns about the health of his future children due to a inherited heart condition of his wife. This resulted in the creation of the Smart Sock.

Owlet is a company that provides parents with help through a so-called Smart Sock. The company was founded in 2013, which was also the year that the co-founders began to work on in-home infant pulse oximeters. Their mission is as follows: ‘’ Better care for babies in the home, empowering parents with the right information at the right time’’ (Owlet, 2019).

The smart sock allows parents to track the heart rate and oxygen level of their infant, even while the baby is asleep. The levels are sent in real-time to the parents’ phone, which then allows them to gather insights about their baby’s wellness. If the smart sock identifies a drop in the heart rate or the oxygen level outside of a pre-set range, it will notify the parents which allows them to react in the way that is needed. The smart sock comes with a base station, which will glow green to reassure the parents that their infant is doing fine. Not only will this help the parents understand the needs of their babies, but it will also allow them to experience less anxiety and improved sleep. (Owlet, 2019).

The Market

The Smart Sock of the baby-care company is active in the smart textile market. By sensing and reacting to stimuli in its environment, wearable smart textile allows the wearer to experience increased functionality (Vagott et al., 2018). The increase in the miniaturization of devices and the past advancements in technology have driven the market growth. Moreover, there is a high demand in consumer electronics, which positively impacts the market (Grand View Research, n.d.).

Business Model

As the aforementioned, the key activity of Owlet’s Smart Sock is to provide parents with access to better tools to care for their infant in their own home. By using smart sensors and pulse oximetry, the Smart Sock offers a better picture of the wellness of a baby. The sock collects the necessary data in order to provide parents with insights about their infant. In addition, this will also enhance the quality of life of the parents, as the product will reduce anxiety and improve their sleep. Moreover, it will also make them more knowledgeable about the baby’s health, as it can be difficult to understand the signals that baby’s express. (Canal, 2018).

Currently, parents can buy the Smart Sock for £269.00 on Owlet’s online web shop and in retail stores such as Target and Walmart (Owlet, 2019).  The Smart Sock is suitable for infants up to eighteen months and is targeted towards anxious millennial parents. Owlet started selling their Smart Socks in 2015, which turned out to be a great success, as the company booked $2 million in revenue by the end of the year. After some years and some adjustments to the products, Owlet managed to close 2017 with $19 million in revenue. During 2017, the company has also raised $25 million in funding, which they used to expand internationally. (Sportelli, 2017).

By using different channels, such as online web shops, retail shops and social media, Owlet is able to sell their products to tech-savvy parents. The Smart Sock comes with 3 fabric socks (sizes 0-18 months), a Smart Sock sensor and a base station. Furthermore, it also includes charging cords, a power plug converter and a power adapter. The results of the Smart Sock are sent to the base station, which then will transmit the data to an application that allows parents to have insights about their baby’s health. (Owlet, 2019). Owlet also provides their customers with a 45-day Peace of Mind Guarantee, which allows the customer to return the Smart Sock within 45 days of purchase. This will increase the likelihood that a doubting customer would purchase the product, as they will not have much to lose when they do not like the product after their purchase. (Owlet, 2019).   

The Smart Sock is attractive because it creates value for the parents by reducing the anxiety that they experience when taking their new-born to their own home, realizing they left the safe hospital environment. The Smart Sock alarms parents when it senses that something is wrong, which gives them a peace of mind.

The Challenges

Even though the Smart Sock sounds like a revolutionary product to many anxious parents, there were still some negative reviews. One of the challenges that Owlet experienced at the beginning, was to convince parents to spend so much money on a single product. Moreover, there were also some reports of frequent false alarms, which worried parents even more. In addition, there were also some cases in which parents claimed that the sensor created some burn marks. However, Owlet took these reviews seriously and made some adjustments to their product. (Sportelli, 2017).

Besides the negative reviews, there were also some concerns with regards to privacy. Smart wearables are gathering consumer data and transmitting it over Wi-Fi, Bluetooth and the Internet. (Friel, 2017). According to consumers, the data has intimate details about their infant’s health. This could raise some concerns, as the data might be sold to other companies, such as insurance firms. According to Dr Leaver, Curtin University associate professor, this is not a stretch to imagine, given the history of similar products such as the Fitbit. (Friel, 2017).

References

Canal, E. (2018). This Company Makes Wearable Devices for Babies So Their Parents Can Sleep Better. Available at: https://www.inc.com/emily-canal/best-industries-2019-owlet.html

Friel, A. L. (2017). Babies and Baby-making, or Not… Privacy and Security Lessons for the Internet of Things. Available at: https://www.dataprivacymonitor.com/internet-of-things/babies-and-baby-making-or-not-privacy-and-security-lessons-for-the-internet-of-things/

Grand View Research. (n.d.). Sensor Market Analysis, Market Size, Application Analysis, Regional Outlook, Competitive Strategies And Forecasts, 2014 To 2020. Available at: https://www.grandviewresearch.com/industry-analysis/sensor-market

Owlet. (2019). Why Parents Love the Smart Sock. Available at: https://owletbabycare.co.uk/

Sportelli, N. (2017). Owlet’s Smart Sock Makes Millions Selling Parents Peace Of Mind — But Doctors Are Unconvinced. Forbes. Available at: https://www.forbes.com/sites/nataliesportelli/2017/10/03/owlets-infant-health-monitor-is-winning-over-millennial-parents-doctors-are-another-matter/#2b059a976469

Turner, R. (2017). Owlet Smart Sock prompts warning for parents, fears over babies’ sensitive health data. Available at: https://www.abc.net.au/news/2017-09-12/owlet-smart-sock-prompts-warning-for-parents-privacy-concerns/8893104

Vaggot, J., Parachuru, R. (2018). An Overview of Recent Developments in the Field of Wearable Smart Textiles. Journal of Textile Science & Engineering.  Available at: https://www.omicsonline.org/open-access/an-overview-of-recent-developments-in-the-field-of-wearable-smart-textiles-2165-8064-1000368.pdf

Viralspace: an on-demand user-generated-content marketplace


What is Viralspace?

Viralspace is created by three master’s students of Stanford, Hiro Tien, Ashwini Pokle and Apoorva Dornadula and is an on-demand user-generated-content marketplace. Viralspace is founded in 2018 when Hiro and Apoorva, who were interns at Google at that time, teamed up with Ashwini, a former amazon software engineer to found Viralspace. Viralspace provides a platform where people can create content for brands. Brands are able to crowdsource brand-aligned content from people that post pictures or videos containing products of that specific brand on social media. The founders of Viralspace think this will be a more effective way for content creators to collaborate with brands, without spamming their followers. (The Stanford Daily, 2019).

How it works for creators

At the moment, Viralspace is a web application where users can create an account and then post content that features the brand. On the platform, brands post photography and videography contest, called challenges.  These challenges created by the brands are brand-sponsored competitions where customers can submit their content. On the homepage of Viralspace, the challenges can be found along with their descriptions and rewards. Right now, for example, the #whyilovecoupa challenge is running. Coupa Café is a coffee and dining company that has also opened several locations at Stanford University. Customers are asked to upload a photo or video of them with their favourite Coupa Café product and explain in the caption why they love Coupa Café. These challenges are live during a certain period and at the end of each challenge, the submission with the most votes earns the People’s Choice Award, which typically ranges from $50-100. People can share links to their post on social media so they can get more votes with the help of their friends and followers (The Stanford Daily, 2019).

#challenges on Viralspace platform

How it works for brands

Brands can contact Viralspace and tell them their marketing needs and what they’re looking for: photos of people with their product or inspiring video storytelling for example. Then, Viralspace will create the custom challenge and get creators submit content at the end of the certain time period the winners will be chosen. Right now, those top three submissions are chosen by Viralspace and the companies themselves. But in the future, they hope to eventually develop an algorithm that is able to select the winning creators and submissions. In this way, companies can acquire the winning content to use on their social media and post authentic user-generated content. The benefit for companies is the fact that they are able to crowdsource advertising material at relatively low costs. And on the other hand, the platform creates value for customers by reward them for creating and uploading content. In an interview Dornadula said that she differentiates Viralspace from potential competitors because Viralspace is not ‘selling audience or taking advantage of audience’. But Viralspace is focussing on content creation and the virality of social media posts. According to the Kleiner Perkins Internet Trends Report (2018), user-generated content fetches an engagement that is seven times as high as that of brand-generated content. This in combination with the fact that companies are able to crowdsource advertising material at a relatively low costs, makes it attractive for companies to use Viralspace.

Business model

At the moment, Viralspace is still a beta version and in development. Viralspace joined an accelerator program early January and received $150.000 in funding from a venture capital firm named Village Global. The team is currently working with their advisor Chris Yeh from Village Global to construct a business model. But it is sure that Viralspace will be a two-sided platform where on one side of the platform the content creators are and on the other side the brands. Right now, they are considering charging brands for a Viralspace subscription while keeping user accounts free of charge. In this way it would be more attractive for content creators to join the platform, since it will be free and they can make money or win prizes. As with all platforms, it will be more valuable for companies when more content creators join, the so-called same-side and cross-side network effects of a platform (Van Alstyne et al., 2016). And since the platform makes it possible for companies to generate advertisement material at a low cost, it will still be attractive despite the charges that Viralspace will ask to the companies.

Future plans

In an interview with the Stanford Daily, Tien said that all the features they will be building will be in the cause of creating network effects so the platform will be more attractive for both content creators as companies by adding more value. An example he mentioned is the launch of an in-app voting system where users of Viralspace can vote for other submissions and earn a ‘People’s Choice award’. Their vision is to fix the social networking experience between brands, creators and consumers because they think it’s fundamentally broken at the moment (The Stanford Daily, 2019).

In my opinion, the idea of Viralspace is really interesting since so many people post pictures featuring brands on social media nowadays and it would be even more fun when we can make money with it. Since user-generated content is proven to generate higher engagement and is more trust-worthy this could be very interesting for brands and companies as well and maybe it could be the new advertising model of the future…


References

Meeker, M. (2019). Internet Trends Report 2018. [online] Kleiner Perkins. Available at: https://www.kleinerperkins.com/perspectives/internet-trends-report-2018/ [Accessed 24 Feb. 2019].

Tsai, A. (2019). Viralspace: Crowdsourcing virality. [online] The Stanford Daily. Available at: https://www.stanforddaily.com/2019/02/22/viralspace-crowdsourcing-virality/ [Accessed 24 Feb. 2019].

Van Alstyne, M. W., Parker, G. G., & Choudary, S.P. 2016. Pipelines, platforms and the new rules of strategy. Harvard Business Review, 94(4), 54-62

Viralspace.ai. (2019). [online] Available at: https://www.viralspace.ai/how/ [Accessed 24 Feb. 2019].

The Entertainment Experience – User Generated Movie


Paul Verhoeven, a famous Dutch film director had an idea to make a movie in cooperation with the crowd. He launched this project in a very mysterious way with a tweet (translated to English): @VerhoevensTweets. ‘You have to go with your time anyway? Stravinsky started composing music when he was 70 years old. (Schumacher, 2011). Paul Verhoeven was already 73 years old when he decided to try a completely new concept in film making.

His project was called ‘The Entertainment Experience’ and it was the first Emmy award winning, multi-platform concept creating a user generated movie (Entertainmentexperience.com, n.d.). This new way of film making was like this: Paul Verhoeven and his team wrote the first script out of 8 parts of the movie and the other 7 parts of the movie have to be written, shot and produced by the competing teams. The first step is that the scripts are handed in, after which the best script is selected by the public through a voting system. Following this step is that the production teams have to make the movie part that corresponds with the winning script.

All the movie parts are then shown to the public, where everyone can vote for their favourite team and production. The production team that receives the most votes is then selected for that specific part, all of these parts then add up to a complete movie of about 30 minutes. This is a crowdsourcing project because they let the public make the movie parts and let the public decide which part is then added to the movie. A disadvantage of this strategy could be that the team with the largest network will win, because they ask their friends and family to vote for them of course. The quality of the part might be of lesser importance then. Another disadvantage of this strategy is that people might not even take the time to look at all the created parts from all of the teams, I remember watching just the parts that were produced by a friend of mine and afterwards I would give them my vote immediately.

In total there were about 35.000 people participating in this concept, most of them were voters and a smaller group were ‘members’. In total they created almost 300 scripts, 54 films 206 soundfiles, 31 posters and 28 games (Magned, n.d.).

The Entertainment Experience is a platform where participating teams have to show a broad spectrum of skills. Firstly they have to write the script for the 7 following parts, they then have to direct and shoot the movie part, after which they have to do the soundcomposing and editing (Entertainmentexperience.com, n.d.). Furthermore, they have to show their skills regarding 360-interaction and entertainment in general. The concept creates a total of 2 movies. One that is written by the contestants and another one that was written and directed by Paul Verhoeven and his team.

The fact that this movie actually won an Emmy award, is proof that the concept works. The Chinese copied the idea in 2014, but afterwards I couldn’t find any other cases that used the same crowdsourcing business model. The reason for this is not very obvious, but I think that it is quite hard to get many people together that want to commit to making a movie, without actually being sure that they are getting paid for their work. Another reason could be that the project took 39 weeks to complete, which might be a very high barrier for people to commit to such a long project. Moreover, another disadvantage is that as a producer of this film that you’re not sure about the quality of the people competing. If there are not many people competing that are good hobbyists or semi-professionals it might be very hard to achieve a certain quality standard for movies. However there are also advantages in creating a movie with this concept.

A major advantage is that it doesn’t cost as much resources to produce a movie as traditional movies have, because the competing teams have to gather their own resources for the production of the parts. Another advantage is that their might be some hidden pearls in the public, that are actually really talented hobbyists that are capable of producing outstanding work and they might continue to pursue their career after the entertainment experience in movie production. Additionally, this movie is what the people actually wanted, because everyone has been involved in the process of making the movie. This ensures that the production is in line with demand of the market, however it might not be completely true, because 35.000 people don’t represent the entire movie market, but in my opinion this number comes pretty close. A drawback in making a movie in the traditional way is that the producers don’t know whether the public will like their movie or not, this user generated movie concept solves this challenge partly in my opinion.

In conclusion, I believe that this business model is capable of producing a good movie, however it requires a lot of commitment from all of the participants throughout the entire duration of the project. I think that this is the reason why it hasn’t been done anymore after the project from Paul Verhoeven and the project in China, even though the first concept yielded a very good result with the Emmy award in Cannes.

References

Entertainment Experience – Are You Ready? Retrieved from https://www.entertainmentexperience.com/#About

Entertainment Experience | FCCE / Ziggo. Retrieved from https://www.magneds.com/cases/entertainmentexperience

Schumacher, E. (2011). Verhoeven werkt aan mysterieus filmproject – Filmkrant. Retrieved from https://filmkrant.nl/nieuws/verhoeven-werkt-aan-mysterieus-filmproject/


Procter & Gamble Corporation: value co-creation through open innovation


This blogpost provides information about the Connect+Develop platform created by Procter & Gamble (P&G). The blogpost by 441485DG (linked below) has also touched upon this subject, however, this post is a more up-to-date and in-depth analysis of how P&G  has been successful in value co-creation through their online platform website.

P&G is one of the largest consumer goods manufacturers, distributors and advertisers worldwide, with more than 65 products and a global reach of 180 countries (Procter & Gamble, 2006).

A short history

P&G was established in 1837 by William Procter and James Gamble, a candle maker and soap maker, respectively (Procter & Gamble, 2006). The company became successful soon: in the 19th century, P&G had several contracts to supply soap and candles to the Union Army during the American Civil War (Procter & Gamble, 2006). In 1930, P&G acquired Thomas Hedley Co, a company based in the UK, which was also the beginning of P&G’s international expansion. After this, P&G made several acquisitions, expanding to a number of different business divisions (Procter & Gamble, 2006). Furthermore, P&G launched a successful range of personal health, grooming, beauty and home care brands (Procter & Gamble, 2006).

However, during the 1990s, the company encountered a reduction in sales growth (Agafitei & Avasilcai, 2015). This was mainly due to their closed business model, where there was no communication with outside partners about the development of novel products (Agafitei & Avasilcai, 2015). Moreover, the company considered its technology a secret, and licensing was rarely done (Agafitei & Avasilcai, 2015). Because of the rise in global competition and the increase in R&D costs, the company decided to switch to a business model with more proactivity (Ozkan, 2015).

Business idea

In order to switch to a more proactive business model, P&G considered co-creation and open innovation. Co-creation occurs when a company brings different people (and parties) together to cooperatively produce a mutually desired outcome (Agafitei & Avasilcai, 2015). With co-creation, the key focus is on the interests of all stakeholders, creating value by continually improving experiences of all stakeholders. The advantage is that co-creation increases engagement with all stakeholders, and that it continuously builds on new interactions and experiences, leading to increased creativity, productivity, lower risks and costs.

According to Lawer (2017), open innovation is a standalone form of co-creation, because it is more distributed and because companies give more control to parties joining the platform. More specifically, open innovation is a way for firms to use the strengths and ideas of people outside their company, in order to improve products or internal processes of the firm (Ozkan, 2015).

Business model

In order to become more proactive, the company launched the Connect+Develop platform in 2001 (Procter & Gamble, 2019). This is an open innovation platform where the company engages with the most innovative minds to deliver on P&G’s opportunities (Procter & Gamble, 2019). The main idea behind Connect+Develop is to create an opportunity for people outside the company to improve current products, and to create innovative ideas for P&G (Agafitei & Avasilcai, 2015). Moreover, outside parties are also able to contribute by solving tricky problems within the company (Ozkan, 2015). In order to simplify and increase engagement with outside parties, P&G launched a Connect+Develop website in 2013 (Ozkan, 2015). The platform can be accessed via https://www.pgconnectdevelop.com/. The website directly links outside parties to the top needs of the company, and P&G management and evaluators directly to user submissions. More specifically, the “current needs” button shows all different needs for different categories. This way, the evaluation process becomes faster, increasing overall efficiency of the platform (Ozkan, 2015). For example, when a user clicks on the current need category “beauty and grooming innovations”, it shows an explanation of the category, and it shows that there are no current needs for it. However, every user is still able to submit his/her innovative idea by clicking on “click here to submit your innovation” (see figure 1).


Figure 1: Current needs – beauty and grooming innovations category

Furthermore, there are several criteria that a user should consider before he/she is able to submit his/her idea, which is also explicitly shown on their website (see figure 2). P&G also states which type of solutions they are not interested in, which can also be found on the “submission criteria” page.


Figure 2: Submit your innovation – submission criteria

Through this online platform, P&G receives a great number of open innovation submissions. These proposals need to be managed and reviewed. In order for this process to work efficiently, the online platform helps P&G by collecting additional data the company needs. Then, the submissions are reviewed by a specific team within Connect+Develop. Approved submissions are then distributed to their relevant business departments for further review (Ozkan, 2015).

Efficiency of the model

Looking at it from a joint profitability perspective, the model works. According to Huston & Sakkab (2006), more than 35% of the company’s new products have elements of the open innovation submissions. Moreover, the success rate of P&G’s innovation has more than doubled and the costs of innovation have reduced (Huston & Sakkab, 2006). Lastly, since 2000, P&G’s stock price had doubled as well (Huston & Sakkab, 2006). From the customer perspective, the Connect+Develop platform has also been beneficial. By co-creating and using the open innovation platform, customers are able to define products they will eventually want to purchase, and they do not have to wait for firms to decide the key elements of a product (Agafitei & Avasilcai, 2015).

Considering the feasibility aspect, the model is a bit less efficient. According to Veer et al. (2015), process coordination costs and implementation costs are high for an open innovation platform. Furthermore, open innovation requires adapting the culture of the company, as there might be a feeling of loss of knowledge control among employees (Veer et al., 2013). Lastly, from a legal point of view, an effect of open innovation might be intellectual property spillovers (Veer et al., 2013). Because of these costs and risks, open innovation requires a lot of research and planning prior to its implementation, which might not be feasible for smaller companies or startups for example (compared to P&G).

All in all, P&G has been able to create an effective value co-creating, open innovation platform. By becoming more customer-centric, the company has increased its number of new products, and doubled its stock price. However, the risks of open innovation should be taken into account before implementing it.

Reference list

Article 441485DG: https://consumervaluecreation.com/2016/03/11/procter-gamble-from-rd-to-connectdevelop-platform/

Agafitei, G. and Avasilcai, S. (2015). A case study on open innovation on Procter & Gamble. Part II: Co-creation and digital involvement. IOP Conference Series: Materials Science and Engineering, 95.

Huston, L., and Sakkab, N. (2006). Connect and develop: inside Procter & Gamble’s new model for Innovation. Harvard Business Review. Retrieved from https://hbr.org/2006/03/connect-and-develop-inside-procter-gambles-new-model-for-innovation

Lawer, C. (2017). Eight Styles of Customer Value Co-Creation. Retrieved from https://www.umiohealth.com/media/2309/eight-styles-of-customer-value-co-creation.pdf

Ozkan, N. N. 2015. An example of open innovation: P&G. Procedia—Social and Behavioral Sciences 195:1496–502

Procter & Gamble. (2006). A company history. Retrieved from https://www.pg.com/translations/history_pdf/english_history.pdf

Procter & Gamble. (2019). What is connect and develop? Retrieved from https://www.pgconnectdevelop.com/what-is-connect-develop/

Veer, T., Lorenz, A., and Blind, K. (2013). How Open Is Too Open? The “Dark Side” of Openness along the Innovation Value Chain. Paper Presented at the 35th DRUID Celebration Conference, Barcelona, Spain, June 17–19.

Name: Berna Hizli
Student number: 408455

The solution for any bad-hair day


The problem? Hair, hair and hair

With friends you can share almost anything: secrets, food and even your favorite lipstick, a daily product that cannot be really shared is shampoo. Every individual has a different hair type, which means that a one-size-fits-all hair care product no longer meets the needs of an individual customer (Chen, 2019). Today, the average drugstore has more than 600 hair products on their shelves. This true sea of shampoos, conditioners, gels and hair masks should imply that we’ve started to love our hair even more and that there is something in stock for everyone, right?  Well this is not really the case, the fact that there is plenty of choice does not immediately mean that the perfect hair product to match your hair is in there.

Is there really a solution for everyone?

Is not everything more beautiful when it is actually made for you? Personalization, it is a principle that is often applied in the clothing and food industry. However, when talking about a personalized product, the hair industry is often left out (Spire,2019). There are several hair products that can be used for obvious hair types which is not applicable for each individual with an exceptional hair type. Every hair is different, which implies that each individual is in need of a specific hair-care option. Your red soft curls probably need a completely different treatment than someone who has wavy dyed blonde hair. In addition to the hair type, the hair products that are currently on the shelves are not concerned about external factors such as the environment and stress levels that may have a major impact on the hair. The company Prose, founded in 2017, has started to change this and produces a personalized hair care brand that fits your hair perfectly. Prose wants to drastically change the hair industry by using a survey to design a hair arrangement made especially for the user. We have seen this type of personalization in everything but shampoo. While brands such as Ouai claim to also  and offer comparable hair care services, Prose claims to stand out from the competition by providing one the most thorough consultation services on the industry. The outcome? A personalized shampoo, conditioner and mask, each made from a combination of 76 possible ingredients (Olsen & Teich, 2019).

Prose’s products

How does it work?

The composition of each hair is unique because of its simplicity or DNA, adding factors such as geographical location, lifestyle and styling patterns can make things a little more complicated. Prose takes all of this into consideration when designing their customized products (Prose,2019).

To arrive at the personalized product, you need to answer a series of questions online so Prose understands the hair needs, environment and lifestyle of the consumer. Prose’s hair quiz is an in-depth study resulting in 85 data points and asks questions about everything to be provided with as much information as possible (Prose,2019). Questions are asked about for example: what products the consumer usually styles the hair with, what diet is followed and even questions are asked about stress levels (Booz,2019). It focuses on the current hair situation to create the solution that is most suitable for the hair.

Based on the hair quiz, the company knows which ingredients should be included in the adapted formula. The answers to the questions create a unique product which makes the hair care personal, what given the multitude of hair types and needs, is necessary. Once finished the quiz, the consumers can choose which tailored products they want to buy.

Question in the quiz (Chen,2019)

Will the personalized hair product be efficient?

Prose sells three products: shampoo, conditioner and a hair mask. The prices of the first two aforementioned hair products have a price between the range of 25 and 38 dollar (Prose,2019). While the hair masks costs between 38 and 58 dollars. Consumers can expect to pay at least the double of what they were used to pay for hair products at a drugstore (Chen,2019). The high price can make consumers decide to buy mainstream and affordable hair products. However, when purchasing a Prose product, the consumer signs up for personalization and the online specific questionnaire makes it clear that the individual needs are being targeted and this is accompanied by a relatively higher price. In addition to determine the success, it must also be taken into account that the personalized hair products are not always successful products at the beginning since the first quiz does not always lead to the perfect formula (Booz,2019). This could become very expensive if the consumers continue to change their formula which may cause the consumer to decide not to make a purchase anymore. The organization itself believes that Prose’s high-quality and better-for-your-hair formulations make the higher costs trivial. As a consumer you don’t need to bounce back and forth anymore to find your perfect shampoo or conditioner, with Prose you have a product customized to your own needs.

Chen, C. (2019). This personalized hair-care startup makes shampoo and conditioner for your specific hair needs and goals — and it actually works. [online] Business Insider Nederland. Available at: https://www.businessinsider.nl/prose-personalized-shampoo-conditioner-review-2019-1/?international=true&r=US [Accessed 24 Feb. 2019].

Booz, N. (2019). Is It Worth It: Personalized Shampoo and Conditioner. [online] GenTwenty. Available at: https://gentwenty.com/function-of-beauty-personalized-shampoo-and-conditioner/ [Accessed 24 Feb. 2019].

Olsen, C. Teich, J. (2019). This company made us our own custom shampoos—here’s what happened, If you’ve got hair trouble, Prose wants to talk. Available at: https://www.reviewed.com/home-outdoors/features/prose-custom-hair-care-review [Accessed 24 Feb. 2019].

Spire, E. (2019). How much do consumers care about personalised goods?. [online] Medium. Available at: https://medium.com/@emilie_7567/how-much-do-consumers-care-about-personalised-goods-a325eff73434 [Accessed 24 Feb. 2019].

Prose.com. (2019). Fresh & Personalized Hair care – Prose. [online] Available at: https://prose.com [Accessed 24 Feb. 2019].

How Instagram Bloggers Have Taken Over the Fitness Industry


The “ideal” body type for women has changed over the years drastically. It can seem as if the ideal standards of beauty must be historically universal, paradoxically the contrary is true! The perfect woman’s body goes from what we would now call morbidly obese, in the Paleolithic era, to a start over a serious obsession with body image and weight from the 20s on to the Supermodel era in the 80s, to the heroin chic and Twiggy look of the 90s. (Petty, 2018) Nowadays, we would like to think that there is no ideal for a quintessential body as the concept of body positivity is gaining more and more reasonable acceptance. Never the less, we can see a massive increase of people wanting to be and look healthy and athletic.

Booming Business

The fitness industry momentarily is booming. This sector has been growing 3 to 4% annually in the last 10 years and this business direction will not slow down anytime soon (Mitgley, 2018). According to Forbes (2018), the chances are high that the expansion will only accelerate in the upcoming years.

. This growth is cause by virtue of the idea of “a healthy body equals a happy life”, therefore more people work out and fitness is becoming trendy. Or perhaps to be more accurate, the idea of fitness is in: a rising amount of the western population is heading to the gym, or at least paying for a membership. This development puts the fitness industry in a pretty sweet spot: The western population, which is quite unhealthy and overweight, is looking for ways to get in shape. And to be more precise: to get in shape fast, as we as women would like to have an overnight pill, and an easy remedy for weight loss and toning up.

The hottest job in town

This idea of the perfect body is fueled up by diverse social media influencers on social media, principally Instagram. Let’s be completely honest: Being an influencer is probably the hottest and most coveted job in 2019, and simultaneously it is also a job that did not exist five years ago. So who are these people? At the core, an influencer can be your next-door neighbor, without a true stand out special talent, this makes the person you see online more “relatable”. As a subscriber, you can develop a deep connection with the influencer, as their life is more within reach. Therefore, fitness Influencers have become some of the most powerful across social media. Because “if the girl on Instagram can do it, why should not I be able to do it too?”

Fitness influencers as Tammy Hembrow, Kayla Itsiness, Anastasia Mironova, and the sisters Karena and Katrina, are transforming the way people look at fitness and at the same time become social media celebrities and earn money from their “influencer jobs”. How do they do that last part?, you might ask. Fitness programs and building a strong community. (Dibiase, 2018)

Instagram fitness programs are becoming increasingly popular as they claim to have a quick fix for our weight and looks problems: you can choose yourself, depending on the influencer if you want to transform your body in 30 days, 2 months or 12 weeks, they can plan it all out, and you can even choose how much attention you will get from that one social media celebrity you trust the most! Contingent upon how much you as the follower pay for your plan (varying from 10 euros per month to over 100 euros), the fitness program can be highly individualized or quite simple.

Why does it work?

The fitness programs are incredibly popular, due to the high following and therefore trustfulness of the influencers. Additionally, you can communicate with someone who in your eyes has a “celebrity status” and still responds to YOU!, a “normal person”. More over this way of getting fit is more affordable to people budgets, compared to hiring a personal trainer, and also is a smaller and easier step for people who are new to the fitness world and may be shy, to start working out. The influencers grow by the word of mouth and recommendations of their followers and fitness guide users. One of the biggest social media phenomena, Kayla Itsiness with her 12-week Bikini Body Guide, calls her followers the “Kayla Army”. This step is a psychological trick, which creates a sense of belonging with the subscribers of the Instagram channel. More over, since the establishment of stories, people who participate in the fitness programs or are very active on the influencers page, can receive shout outs as a reward. This participation reward system fuels up people’s enthusiasm, as they feel valued by their idol and flattered, and therefore try even harder to achieve the same feeling. Besides that, influencers use their follower community to improve their programs, as they ask for feedback and tips. An additional plus point of working together with enthusiastic and concerned people, is that they will supply the influencer with free advertisement and recommendation tool, by simply showing their results on their own personal page and in real life.

Some fitness influencers create competitions, where people who have attained the best results, by either losing the most weight or looking leaner and more athletic, are rewarded with prices that are announced beforehand. Therefore you, as a fitness program user, not only receive your dream body by participating, but also have the chance to win materialistic or monetary prices. This approach triggers people’s eagerness to be more engaged as well.

Can it backfire?

AN increasing amount of people are now concerned that the fitness gurus from Instagram are not qualified to design the food and workout programs and are therefore harming their follower’s health. (Praderio, 2018) Therefore the reputation of certain influencers can be harmed by unfavorable well-being incidents Moreover, the question remains: how long will Instagram be still a popular and highly used app? We have already seen the trend of Facebook fade away in the last few years.

Sources

Dibiase, L. (2018). The Evolution of Instagram & YouTube Fitness Influencers, Unamo Blog. Retrieved from https://unamo.com/blog/guest-posts/fitness-influencers

Midgley, B. (2018). The Six Reasons The Fitness Industry Is Booming. Retrieved from https://www.forbes.com/sites/benmidgley/2018/09/26/the-six-reasons-the-fitness-industry-is-booming/#34a746e2506d

Petty, A. (2018). How women’s ‘perfect’ body changed through history. Retrieved from https://www.thelist.com/44261/womens-perfect-body-types-changed-throughout-history/?utm_campaign=clip

Praderio, C. (2018). THE DARK SIDE OF INSTAGRAM: When fitness culture goes wrong. Retrieved from https://www.thisisinsider.com/the-dark-side-of-instagram-fitness-culture-2017-6

How will the future of flagship stores look like? An inspiration from Nike House of Innovation


You’ve probably heard “retail apocalypse”. Brick-and-mortar retail is in trouble, even those retail giants are closing hundreds of stores every year. It cannot be denied that the digital revolution has changed the retail industry sharply and this change will still going on. As Michael Forhez who is Oracle senior director of retail and consumer goods said, “I can either shop on my own couch or I can shop at the retailer’s shelf—and I’m going to need a powerful reason to get off my couch”. That is the biggest challenge ahead of the entire retail industry (Currey, 2019).  

Source: Euromonitor

So, how to survive in the e-commerce era? How should the future of flagship stores look like? Nike and Ministry of Supply could probably give some inspirations. 

Nike House of Innovation

Nike House of Innovation sits in Soho shopping corridor of New York City, is a six-floor flagship store includes:

  • a mini basketball court; 
  • a treadmill in front of screens simulating different outdoor runs; 
  • a small, enclosed soccer area; 
  • a customization shoe bar where shoppers can personalize a pair of Nike Air Force 1s;
  • dedicated coaches on staff who can put customers through drills to test out sneakers (Bain, 2017).

The first floor is an area where you can customize your own shoes by choosing a sneaker style and/or changing your shoes’ laces. With an appointment, a more comprehensive personalization of the shoes is available. Furthermore, to match the customized shoes, the first floor also equipped with well-trained designers that can help you design the customized clothing if you request. 

The mini basketball court and the soccer area are covered with cameras that enable to capture motion from 360 degrees. Moreover, in order to recommend the most suitable running shoes, cameras are installed next to the treadmill to record and analyze the customer’s gait during running. It also allows customers to access the footage and share on their social media by logging into their online Nike account. 

The Nike app is the link between offline and online shopping. For fully enjoying the benefit of in-store services, you need to download the Nike app first to your phone. Through the app, 

  • you are able to ask the store staff to add more items to the fitting room online and you will receive a notification once items are ready. 
  • you are able to purchase the items online without waiting in the line at the counter. Kiosks also sit on each floor where you can drop off hangers and pick up a bag.
  • if you are a member of Nike’s loyalty program NikePlus, you are able to reserve and pick up items from the in-store locker by your phone. Moreover, the store allows you to customize your shoes and clothing online and pick up items from the in-store locker (Bain, 2016).

Ministry of Supply

Some companies are seeking for other ways to attract customers visit their flagship store. For instance, Ministry of Supply, it installed a 3D knitting machine at its flagship store in Boston City. While some companies have used it in factories, it is the first time that the 3D knitting machine installed in a flagship store. On the iPads, you can see how products could be personalized. So far, customers enable to customize the shape, the colour and decorations of a sweater. Then, the 3D machine will start to make it. After a 90-minute wait, a customized sweater will be ready for you (Ministry of Supply, n.d.).

The Omnichannel business model and the role of new flagship stores

According to four business models as above, in order to achieve the sustained profitability in the digital era, it is a trend for business leaders of the retail industry to shift their traditional brick-and-mortar business model to the omnichannel business model (Weill & Woerner, 2015). Omnichannel businesses provide customers access to their products across multiple channels, including physical channels, like shopping in a brick-and-mortar store, and digital channels, like shopping online from either a laptop or mobile devices. 

The core of omnichannel businesses is achieving a seamless shopping experience, which requires the company to possess the complete knowledge of customers under the value chain business design. Therefore, there is a strong claim to “owning” the customer relationship, where is also the challenge comes from. For omnichannel businesses, challenges are from two aspects. On the one hand, the challenge is how to attract more target or potential customers. On the other hand, the challenge is to seek more and more knowledge of the existing end customers and their goals to reduce the likelihood of customer churn.

For omnichannel businesses, personalization and customization are the keys. Nike house of innovation, a 6 floors brick-and-mortar store in Fifth Avenue is a costly investment with a high risk of failure since the e-commerce sales are growing so rapidly. But the most forward-looking companies, like Nike, they realise that physical stores are still essential for their brands, once physical stores can provide more personalized and customized services that e-commerce cannot or not yet. 

These new high-tech and high-concept flagship stores, unlike the traditional physical stores, they emphasize more on enhancing one-to-one connections with customers and customizing products by using up-to-date technologies. Retailers and customers no longer just a simple sale and purchase relationship, these new flagship stores turn the retail into an experience that provides an attractive reason for customers to visit their stores. In other words, they as a supplement to enrich the customer experience of shopping and as a bridge to blur the boundaries between online and offline shopping. Are you willing to leave your couch and gain a wonderful customer experience in a new high-tech and high-concept flagship store?

Reference

Bain, M. (2017). A fantastical new world of high-tech, high-concept stores is here. [online] Available at: https://qz.com/956745/retail-experiments-from-farfetch-nike-and-amazon-offer-visions-of-the-store-of-the-future/[Accessed 23 February 2019].

Bain, M. (2016).Nike’s new store in New York is like Legoland for people who love sports. [online] Availableat: https://qz.com/836671/nikes-new-store-in-new-york-has-a-basketball-court-where-you-can-test-drive-their-shoes/[Accessed 23 February 2019].

Currey, L. (2019). Advanced Technology Key to These Retailers’ Success, Survival. [online] Available at: https://www.forbes.com/sites/oracle/2019/02/22/advanced-technology-key-to-these-retailers-success-survival/#315f2d506ec1[Accessed 23 February 2019].

Minister of Supply (n.d.) Introducing Our 3D Print-Knit Shop. . [online] Available at: https://ministryofsupply.com/blogs/tested/introducing-our-3d-print-knit-shop[Accessed 23 February 2019].

Weill, P., & Woerner, S. L. (2015). Thriving in an increasingly digital ecosystem. MIT Sloan Management Review, 56(4), 27. 


Personalized pricing: is it fair or not?


A review of the article “Personalized pricing and pricing fairness” by Timothy J. Richards, Jura Liaukonyte & Nadia A. Streletskaya (2016)

The development of high granular price appearance algorithms and the large amount of customer data that can be collected through online purchases, led to the increasing use of personalized pricing (Weisstein et al., 2013). In a transparent environment, personalized pricing may cause a feeling of distrust, unfairness and fears of price-gouging. These feelings can arise when customers notice that they pay a higher price for a product or service than others do. In the end, this feeling of betrayal could lead to reduced purchase intentions of customers. Therefore, it is of high importance for organizations to arrange their pricing system in a correct way, so that it does not affect customers’ purchase intentions in a negative way. The paper of Richards, Liaukonyte & Streletskaya (2016) investigates how interpersonal price differences could lead to customers’ perceptions of unfairness. Subsequently, the paper gives a mitigation strategy for companies to reduce the negative effects on sales because of personalized pricing.

During the course Customer-Centric Digital Commerce, we have discussed the phenomenon personalized pricing with the example of airline tickets and a bottle of Coca-Cola. Why do we feel betrayed if there would be interpersonal pricing differences for a bottle of Coca-Cola, but do we accept these differences when it comes to airplane tickets? This has to do with the product type and setting, but also with the customers’ price fairness perceptions. According to Richards et al. (2016)  the price perceptions of customers are mainly derived through social norms and transactional utility, which means that customers are more satisfied if they paid less than their reference price. A customer’s reference price is often based on what other people paid. Customer’s price fairness perception can be determined by comparing the customer’s reference price with the actual price. Perception of price unfairness is in this study shaped by self-interested inequity aversion, which entails that people are less likely to purchase when they value prices as unfair and people are more likely to purchase if prices are more fair or price inequity is in their favour. Based on these concepts, the article raises the following main hypotheses for the study:

  • “There is self-centered inequity aversion in which agents experience negative marginal utility whether others pay less than themselves, or they pay less than others.” (Richards, Liaukonyte & Streletskaya, 2016: p143)
  • “When we allow buyers to negotiate the final price, however, we expect to find fairness perceptions improve to the point where much larger differences in realized prices are acceptable, and discriminatory pricing equilibria are generally stable.” (Richards, Liaukonyte & Streletskaya, 2016: p139)

Methodology

The researchers have tested the hypotheses by an experiment in a lab setting with a survey among 278 students from a large Eastern US university. The students are randomly assigned between two treatment groups, the price-posted treatment or the price-discovery treatment. Before the treatment, the risk preferences of the students are measured by a multiple choice exercise. In the exercise, students are asked to choose between two lotteries (A or B) whereby lottery A is more safe in terms of risk compared to lottery B. This exercise is done, because the researchers expect that people’s risk seeking or risk avoiding behaviour can be an important factor in determining price inequity aversion. After this exercise, the experiment continues with the treatment procedure. First, the students had to practise with making purchase decisions though the board game Monopoly. Hereafter, the real experiment started, which consisted of multiple rounds where students were confronted with different price distributions for the same T-shirt.  In the price-posted treatment group, students had to accept or reject the T-shirt price without the chance to negotiate. In the price-discovery treatment group, the participants had the option to negotiate on the price by submitting their own bid, besides the option of accepting or rejecting the price just as in the price-posted treatment. In both groups, the students were asked to rate the fairness of the prices on a five-point Likert scale. By this way the researchers were able to measure the impact of inequity on purchase intentions.

Results

One of the most important results that were found by the researchers through the experiment, is about how fairness perceptions influence purchase behaviour. From the participants that rated the prices as unfair or slightly unfair, only 4.9% chose to buy the T-shirt. While from the participants that assessed the prices as fair or generally fair, more than 73% decided to buy the T-shirt. These results show that the feeling of inequity is expected to have an important effect on customer’s purchase behaviour. Another interesting finding is that the price-discovery treatment has a significant effect on the purchase intentions of customers. This means that customers are more likely to purchase consumer goods when they can participate in price determination through negotiation. Furthermore, the research indicates that in a transparent setting more risk averse people are more likely to purchase products even when there is inequity against them.

Main strength of the paper

In my opinion, a big strength of the article is that it brings some novel managerial implications to improve companies’ pricing strategy. The researchers found that customers are much more likely to buy a product when they can participate in the price formation. Companies can use this insight by including customers in the price determination to increase the sales of the company. Furthermore the paper indicates that customers are less likely to purchase products when they perceive the price as unfair. Companies should therefore ensure that customers feel like the prices are fair. Although these insights are very meaningful for companies, the paper does not give very concrete instructions of how companies should include consumers in the price formation process or how companies could ensure that their prices will be perceives as fair. Nevertheless, this paper brings some new, valuable insights in the personalized pricing issue and provides a foundation for future research.

References

Richards, T. J., Liaukonyte, J. & Streletskaya, N. A. (2016). Personalized pricing and price fairness. International Journal of Industrial Organization44, 138-153.

Weisstein, F.L., Monroe, K.B. & Kukar-Kinney, M. (2013). Effects of price framing on consumers’ perceptions of online dynamic pricing practices. J. Acad. Mark. Sci., 41 (5), 501–514.

Pepper: the robot that will revolutionize the retail market


The market

It is not a secret that the retail market has stepped into the ‘data science world’. Today, one of the main goals of retailers is to constantly find innovative ways to get useful insights of their customers through their goldmine of unstructured and structured data (Marr, 2015). One of the implications of these insights are personalized products. According to Mobasher, Cooley & Srivastava (2000), personalization is (any) action that tailors experience to a particular individual. In other words, the data is used to match the products as good as possible to the needs of every individual customer. The process of personalization goes as follows: first, retailers collect data about their customers and try to learn about their customers’ preferences and tastes. Second, they try to develop products or services that match these preferences and tastes. Finally, they evaluate the effectiveness of these personalized offerings, in order to optimize the personalization process (Tsekouras, 2019).

The business model and its opportunities

Since it becomes more generic for retailers to use data that they have about their customers, they have to differentiate themselves from their competitors in some other way than solely using data to obtain useful insights. Here, a new opportunity arises because of emerging technologies. In the present, retailers want to create superior customer experience (Verhoef, Lemon, Parasuraman, Roggeveen, Tsiros & Schlesinger, 2009). A superior customer experience could be delivered through accurate, personalized recommendations because customers like recommendations for the reason that it eases their selection process (Tsekouras, 2019). Next to personalized recommendations, a good in-store experience increases the customer experience (Phibbs, 2019). If you combine these two ways to deliver a superior customer experience, a new addition to a retailers’ business model arises, which could be turned into a competitive advantage. We’re talking about in-store artificial intelligence robots (AI robots).

Opportunities that come along with AI robots

The first opportunity is that the ‘real’ personnel of a retailer is able to do more high-level tasks. This is possible since the robots can replace them in general, repetitive interactions with customers (Ankeny, 2017).

Besides this, retailers find it hard to convert their goldmine of data into useful insights. Actually, the conversion rate from data to useful insights lies between 2- and 3% overall (Donaldson, 2018). By implementing AI robots, all the data is automatically processed through algorithms. This means that the robots are able to make the customer experience far more intimate, targeted and effective, while they are simultaneously improving over time (Donaldson, 2018).

Next to the data being processed better, the robots are able to collect more data, since all the ‘conversations’ with customers are stored into a database. Traditionally, conversations between employees and robots are not ‘recorded’ or anything. Justine Santa Cruz is the VP of partnerships at Satisfi labs, which is a company that makes AI robots. She states that by adding the robots in-store, retailers can learn about what their customers are actually thinking during the whole decision-making process.

One final opportunity is the fact that customers are curious and willing to use new sorts of technologies. Santa Cruz (2019) says that there are no generational challenges that have to be addressed, regarding the willingness to interact with the new robots. Apparently, as is observed in real-life situations, everybody wants to communicate with the robot (Nittle, 2017).

To strengthen these opportunities, a real-life example of the current applications of these kinds of robots is addressed in the next paragraph. This way, the business model becomes more tangible and the efficiency and value of this addition to a retailer’s business model will become clear.

Current applications of the business model and its value

Mall of America has adjusted its business model in a way that they implemented AI robots in their physical stores, called Pepper. Pepper is a robot that can guide customers to specific locations through the mall, talk to the customers about (personalized) promotions and deals and is able to connect customers to other employees. The process of people that interact with Pepper is described by Brandli (2018). But to address this process clearly, I created a figure that illustrates this process, which is presented below.

One stage that might need clarification is the ‘Pepper is unable to help with the customer’s query’. It might be that the AI-robot will not be able to respond to certain specific questions that the robot has not seen before. When this is the case, Pepper is able to connect the customer with a real person that works in the mall. This way, the customer is still being helped at his expectations (Brandli, 2018).

The implementation of Pepper in Mall of America could have resulted in negative feedback, but this has not been the case since its trial (Kumar, 2018). The Ave, a retailer who implemented the robots as well, published their tangible results. They give credits to Pepper for driving a 98% increase in the interactions with customers, a 20% increase in foot traffic and a 3x revenue jump (Ankeny, 2017). In addition, Nestlé implemented Pepper in its Nescafé stores. This resulted in their sales increasing double digits. Concluding, the results up until today are real (Ankeny, 2017).

Potential drawbacks

First, I would like to mention the additional costs for retailers that have to be incurred if you want to implement the AI-robots. If you want to add Pepper to your stores, you will have to pay up $1700 up front, $134/month for maintenance and $89/month for insurance (both for a minimum of 36 months). This means that your costs for Pepper in 3 years will be at least $9.728. This could be a large investment for retailers since they still need to staff other employees (Faw, 2016).

Next to the additional costs, Pepper is a robot that will cost some peoples’ jobs according to some. McCormick (2016) argues that cognitive technology, including artificial intelligence, will replace 7% of U.S. jobs by 2025. However, the tasks are replaced, not the jobs. The robots are not meant to replace employees, but rather assist them in simple tasks. So actually, the robots are a blessing for the employees, since they are able to work on more meaningful tasks that are not repetitive in nature (Donaldson, 2018).

Reference list

Ankeny, J. (2017). How robots in stores could revolutionize the customer experience. Retrieved from https://www.retaildive.com/news/how-robots-in-stores-could-revolutionize-the-customer-experience/434056/

Brandli, A. (2018). CX trendsetters: Is the future of malls a robot named Pepper?. Retrieved from https://blog.centriam.com/is-the-future-of-malls-a-robot-named-pepper-cx-trendsetters

Donaldson, S. (2018). How AI Is Changing the Retail Industry. Retrieved from https://www.business.com/articles/artificial-intelligence-changing-retail/

Faw, L. (2016). Pepper The Robot Will Be Your Companion (For A Price). Retrieved from https://www.mediapost.com/publications/article/276387/pepper-the-robot-will-be-your-companion-for-a-pri.html

Kumar, K. (2018). Mall of America tests robots, chatbot as it looks to improve visitor experience. Retrieved from http://www.startribune.com/mall-of-america-tests-robots-chatbot-as-it-looks-to-improve-experience/474997543/

Marr, B. (2015). Big Data: A Game Changer In The Retail Sector. Retrieved from https://www.forbes.com/sites/bernardmarr/2015/11/10/big-data-a-game-changer-in-the-retail-sector/#5e47c5209f37

McCormick, J. (2016). Predictions 2017: Artificial Intelligence Will Drive The Insights Revolution. Forrester. Retrieved from https://go.forrester.com/wp-content/uploads/Forrester_Predictions_2017_-Artificial_Intelligence_Will_Drive_The_Insights_Revolution.pdf

Mobasher, B., Cooley, R. and Srivastava, J., 2000. Automatic personalization based on web usage mining. Communications of the ACM, 43(8), pp.142-151.

Nittle, N. (2017). Mall of America Gets High-Tech With Chatbot and Humanoid Robots. Retrieved from https://www.racked.com/2017/12/18/16781234/mall-of-america-chatbot-humanoid-robots-pepper

Phibbs, B. (2019). 4 Ways To Improve Your Retail Customer Experience and Sales. Retrieved from https://www.retaildoc.com/blog/improve-retail-customer-experience-sales-follow

Santa Cruz, J. (2019). VIRTUAL RETAIL – THE FUTURE IS NOW. Retrieved from https://mr-mag.com/virtual-retail-the-future-is-now/

Tsekouras, D., 2019. Customer Centric Digital Commerce, Lecture 2, slide 20.

Verhoef, P. C., Lemon, K. N., Parasuraman, A., Roggeveen, A., Tsiros, M., & Schlesinger, L. A. (2009). Customer experience creation: Determinants, dynamics and management strategies. Journal of retailing85(1), 31-41.

Felyx – The newest disruption in the transport industry


“When people think of Airbnb, they visualize accommodation. However, Airbnb itself is nothing more than a tech company, cleverly using software that translates into more than a million rooms across the globe” (Eventige.com, 2019).

Whilst Airbnb was founded 11 years ago, it has become one of the leading companies in the hospitality industry. Contrarily to traditional firms in the hospitality industry, Airbnb does not own any property, but offers a platform on which users can rent their own houses and property to each other (Guttentag, 2015). Between 2016 and 2018, the estimated value of the company has skyrocketed to approximately 31 billion dollars, worth more than multi-billion traditional hotel chains Marriott and Hilton (Smith, 2018).

Sharing economy
The phenomenon of the sharing economy refers to the “sharing of both physical and nonphysical goods and services through the availability of various information systems on the Internet” (Hamari, Sjöklint and Ukonnen, 2016). Airbnb is seen by most as the precursor of the sharing economy, being an inspiration for other firms which have built their business model around the concept of the sharing economy (Proserpio and Tellis, 2011). As the hospitality industry was disrupted by the innovative tech company Airbnb, the transport industry has been disrupted by several companies with similar business models. Uber and Lyft are examples of such companies, both to have disrupted the taxi industry with peer-to-peer platforms (Cramer and Krueger, 2016). Along with the disruption of traditional industries, new concepts came to life as well. An example of such a concept would be the carsharing industry. Car2go is one of the leading companies in the carsharing industry. Originally founded as a subsidiary of automobile producer Daimler AG in the late 2000s, Car2Go enables a user to commandeer a shared vehicle and only charges a fee for the time driven (Martucci, 2018). Car2Go has experienced tremendous growth and reached 3.6 million members in 2018 (Martucci, 2018). After noticing the success of Car2go and the rise of the sharing economy, two Dutch entrepreneurs thought off a similar concept which resulted into the successful start-up Felyx.

Felyx profits by charging a 30 cent per minute fee for the time the scooters are used. Furthermore, in case of incidents, large fees are charged to the users responsible. By the end of 2018, Felyx has grown to 50 thousand members and has expanded its business to Rotterdam and The Hague (Van Raemdonck, 2018). Furthermore, Felyx is planning an expansion to cities as Utrecht, Den Bosch and Eindhoven, as well as a move to outside of the Netherlands, where it has to compete with E-Scooter sharing companies as Cityscoot (France) and Emmy (Germany)(Govecsgroup.com, 2018).

Felyx
Felyx was founded in 2017 by Quinten Selhorst and Maarten Poot and is one of the pioneers in the e-scooter sharing industry (Govecsgroup.com, 2018). By collecting a starting capital of 700 thousand euro via a crowdfunding campaign, Selhorst and Poot were able to place the first 108 e-scooters in Amsterdam (Boerop, 2018). Felyx’s concept is as follows: within the service area users can rent a scooter for 30 cent per minute. Through the mobile app users can find the location of the parked scooters, unlock them and thereafter they can drive the scooter wherever they would like. Parking the scooters and ending the drive, is allowed anywhere at any time. If the drive has ended, the scooter will appear once again on the mobile app as available with its renewed location (Van Raemdonck, 2018).

The interface of Felyx’s mobile app

Being similar to the concept of Car2Go (however with scooters instead of cars), Felyx offers a new way of transport, forming an alternative to public transport and the traditional taxi industry, as well as forming an alternative to disruptive companies as Uber. Felyx is unique in the Netherlands, as it is the first company in the Netherlands to offer the possibility to make use of shared scooters (Govecsgroup.com, 2018). Whereas most companies in the transport business which have built their business model around the concept of the sharing economy offer services involving the use of cars (e.g. Uber, Car2Go), Felyx offers a service involving scooters, which are perceived by many to be more convenient for transport within a city (Brustein and Lanxon, 2018).Furthermore, whereas companies like Uber had the regulatory struggle with entrenched taxi industries about unfair advantages, Felyx does not oppose an incumbent industry which could sue them about similar issues (Brustein and Lanxon, 2018). This offers Felyx an advantage in gaining market share.

What is the value created?
Felyx creates value for users in several ways. A first example, as mentioned above, would be that they introduce a new kind of shared transport, which is perceived as more convenient within cities than their competitors as Car2Go (Brustein and Lanxon, 2018). Second, as Felyx’s scooters can be rented per minute, they offer a cheaper alternative to rental companies which usually rent per whole day (Martucci, 2018). Third, as all of Felyx’s scooters are electric scooters, they are better for the environment than most of their competitors. This ensures a sustainable advantage for Felyx.

What are the challenges?
Besides Felyx’s strengths, the company faces several challenges as well. The main challenge Felyx faces, would be the regulatory struggle it has with municipalities. In Amsterdam, Felyx was ordered to remove all its scooters from the streets in line with the removal of four shared bike services in a battle with nuisance caused by the shared transport services (Kruyswijk, 2017). Even though Felyx was able to fight the above-mentioned decision (Boerop, 2018), if in the future similar decisions will be made by municipalities or the government, Felyx will face a gloomy future.

Additionally, another challenge for Felyx would be that the expansion possibilities might not be too big. The concept is expected to work only in the bigger cities of the Netherlands (Keunen, 2018) and the competition in the rest of Europe is fierce (Govecsgroup.com, 2018). Moreover, outside of Europe, riding a bike is not considered as mature way of transport, let alone driving by scooter (Brustein and Lanxon, 2018). These factors might limit Felyx’s potential growth.

References:

Boerop, L. (2018). Hoe twee 29-jarigen met elektrische deelscooters Amsterdam een beetje schoner willen maken. Retrieved from https://www.businessinsider.nl/hoe-felyx-met-elektrische-deelscooters-amsterdam-een-beetje-schoner-wil-maken/

Brustein, J., & Lanxon, N. (2018). How Electric Scooters Are Reshaping Cities. Retrieved from https://www.bloomberg.com/news/articles/2018-09-07/are-electric-scooters-the-future-of-urban-transport-quicktake

Cramer, J., & Krueger, A. B. (2016). Disruptive change in the taxi business: The case of Uber. American Economic Review106(5), 177-82.

Eventige.com. (2019). How AirBnB Became the Largest Hotel Chain. Retrieved from https://www.eventige.com/blog/airbnb-largest-hotel-chain

Govecsgroup.com. (2018). GOVECS boosts e-scooter fleet of Paris-based sharing provider Cityscoot. Retrieved from https://www.govecsgroup.com/presse/detail/news/govecs-boosts-e-scooter-fleet-of-paris-based-sharing-provider-cityscoot/

Guttentag, D. (2015). Airbnb: disruptive innovation and the rise of an informal tourism accommodation sector. Current issues in Tourism18(12), 1192-1217.

Hamari, J., Sjöklint, M., & Ukkonen, A. (2016). The sharing economy: Why people participate in collaborative consumption. Journal of the association for information science and technology67(9), 2047-2059.

Keunen, Y. (2018). Rotterdam krijgt ook een deelscooter. Retrieved from https://www.ad.nl/rotterdam/rotterdam-krijgt-ook-een-deelscooter~a273ca1b/

Kruyswijk, M. (2017). Ook deelscooters Felyx moeten van de straat. Retrieved from https://www.parool.nl/amsterdam/ook-deelscooters-felyx-moeten-van-de-straat~a4522009/

Martucci, B. (2018). Car2Go Review & Promo Code – Flexible Self-Serve Carsharing. Retrieved from https://www.moneycrashers.com/car2go-review/

Proserpio, D., & Tellis, G. J. (2017). Baring the Sharing Economy: Concepts, Classification, Findings, and Future Directions. Classification, Findings, and Future Directions (December 28, 2017).

Smith, J. (2018). From broke to billionaires: The rise of Airbnb founders. Retrieved from https://www.dailymail.co.uk/news/article-5918039/From-broke-billionaires-rise-Airbnb-founders.html

Van Raemdonck, H. (2018). De deelscooter rukt op – newmobility.news. Retrieved from https://newmobility.news/2018/12/12/de-deelscooter-rukt-op/

Stockon: The new kid on the block in the online grocery market


Stockon delivery by PostNL Food

The Dutch grocery market has known a wave of acquisitions and mergers which results in an oligopolistic market with five clear leaders: Albert Hein, Jumbo, Superunie, Aldi and Lidl (Rabobank, n.d.). This resulted in fierce competition on price, where every grocery formula would leverage its scale to the grow faster than their competitors. However, since the arrival of Picnic the field is changing, another dimension is being taken into account; home-delivered groceries. But not only Picnic saw potential in this market, a new contestant has entered: Stockon is a disruptive online retailer, who provides groceries for consumers’ pantry’s and is unique in the Dutch grocery market since it doesn’t own any physical stores itself and moreover, since it is a subsidiary of PostNL they are able to use their vast distribution network via PostNL Food (Boogert, 2018). This partnership enables Stockon to serve all Dutch customers at minimal cost, hence giving it a competitive advantage over their direct competitor picnic who rely on their own distribution network and can’t grow as fast. The business model of Stockon is built upon their smartphone application, where customers can browse through their products and add them to their online pantry. Stockon fills the gap for customers who are looking for home delivered groceries and don’t want to spend time managing their pantry (Stockon, 2019). Stockon is able to fill their customer’s needs because they center all their activities around their customers, Stockon places its customer at the heart of their business decisions. For this Stockon relies heavily on the data retrieved from their customers via their application. Stockon invites their customers to continuously give them feedback on; delivery, products, advertisement and more. This feedback is used for optimizing their business model to their customers’ needs, resulting in a fully data-driven decision making business model. To ensure a sustainable long-term vision, Stock on expanded their proposition by ensuring that all their products will be delivered C02-neutral (Jansen, 2018) with this, they are a pioneer in the online groceries landscape. 

Stockon bag with logo

As mentioned before Stockon’s business model is centered around its customers via its smartphone application. After downloading and log in on the application, customers can select their groceries & timeframe when they want their items to be delivered via PostNL Food. Moreover, Stockon enables its customers to make a standard shopping list that will be delivered periodically. This standard shopping list is optimized using artificial intelligence techniques supported by customer feedback to ensure the ‘basic’ household products are always present before the customer runs out, this ensures filled cabinets from a customer perspective and moreover a steady revenue stream for Stockon. Next to this Stockon implemented their customer loyalty program ‘Stocktegoed’ where the customers automatically save for discounts via purchases and referrals to friends (Stockon, 2019a), this increases switching cost for the consumers and ensures a repeat purchase. 

To assesses the efficiency of this business model we will look from multiple angles, we will look at the joint probability resulting from a joint pay -off for both consumers and suppliers.

The ritme option

First, we will look at the customers and Stockon, as mentioned before Stockon centers its business model around their customers. Decisions will be made based on their preferences retrieved via data mining or customers’ feedback. For customers, there are several joint payoffs starting with the ‘ritme’ option. This option for groceries can really serve customers’ needs because it takes away the stock management dimension of buying groceries. By better learning the consumption pattern of consumers Stockon is able to more accurately predict when a certain customer is in need of a new product, therefore they will be able to assure customers to never run out of groceries once again (Stockon, 2019a).

The recommended products section

Second, since Stockon is continuously learning about customers’ preferences, they are able to better understand their customers and this can help them to better recommend products to their customers (Li & Karahanna, 2015). Moreover, Stockon gives its customers the option to request products which they feel are missing. This gives customers the possibility to customize their obtained service from the app, with minimal complexity while gaining utility (Dellaert & Stremersch, 2005). 

Third, since Stockon doesn’t have any physical stores, they are able to save costs compared to traditional retail outlets, this combined with an integrated supply chain with PostNL Food results in cost savings for its consumers. Moreover, because Stockon is learning every day about consumer consumption patterns they are able to leverage these insights into their planning and supply chain departments. This results in better coordination between Stockon and the suppliers, and therefore Stockon is able to minimize waste (Stockon, 2019b). This waste minimization is combined with an aforementioned C02-neutral mission for the company. The company does this by actively gaining insight into their CO2 emissions. When these emissions are identified Stockon tries to minimize their impact by using recycled plastic and stimulate PostNL Food to decrease their footprint as well. Stockon does realize they will always have some impact on the environment, but to counter this impact, they partnered with Climate Neutral Group to ensure its C02 neutrality(Stockon, 2019b). 

Not only the customers are able to jointly profit with Stockon, but the suppliers of the groceries sold by Stockon also are able to profit in a new way. Stockon shares data about the behavior of its customers, this allows for direct insight into the behavior of its consumers. This direct access to data enables the manufactures to test new products and see immediate results (Boogert, 2018). As mentioned before, customer behavior is completely documented. This could help manufacturers to further increase the accuracy of their forecasting and planning tools, helped by the ‘ritme’ shopping lists of Stockon’s customers (Stockon, 2019a). Of course, this will further decrease the impact these manufacturers have on the environment because shipments can be coordinated more efficiently. 

Stockon has the potential to revolutionize the online groceries market by filling in the customers need to no longer think about planning their groceries. They have pledged to do this as a C02 neutral company. Who knows Stockon becomes the new benchmark for online groceries.

References:

Boogert, E. (2018, February 13). Boodschappendienst Stockon lanceert met PostNL – Emerce. Retrieved February 24, 2019, from https://www.emerce.nl/nieuws/boodschappendienst-stockon-lanceert-postnl

Dellaert, B. G., & Stremersch, S. (2005). Marketing mass-customized products: Striking a balance between utility and complexity. Journal of marketing research, 42(2), 219-227. Retrieved February 24 2019, from https://pinnacle.allenpress.com/doi/abs/10.1509/jmkr.42.2.219.62293

Jansen, R. (2018, August 23). Distrifood. Retrieved February 24, 2019, from https://privacy.vakmedianet.nl/distrifood/?ref=https://www.distrifood.nl/branche-bedrijf/nieuws/2018/08/stockon-bezorgt-boodschappen-klimaatneutraal-101118637+

Li, S.S. and Karahanna, E., 2015. Online recommendation systems in a B2C E-commerce context: a review and future directions. Journal of the Association for Information Systems, 16(2), 72-107. Retrieved 24 2019, from https://s3.amazonaws.com/academia.edu.documents/37448056/Li_and_Karahanna_JAIS_2015.pdf?AWSAccessKeyId=AKIAIWOWYYGZ2Y53UL3A&Expires=1548859718&Signature=lIrj90Q8pLPDYNwr1LoDrpSJTNs%3D&response-content-disposition=inline%3B%20filename%3DOnline_Recommendation_Systems_in_a_B2C_e.pdf

Rabobank. (n.d.). Supermarkten, cijfers en trends Rabobank. Retrieved February 24, 2019, from https://www.rabobank.nl/bedrijven/cijfers-en-trends/food/supermarkten/

Stockon. (2019, February 15). Zo werkt Stockon. Retrieved February 24, 2019, from https://www.stockon.nl/zo-werkt-stockon/

Handy: Creating two-sided value in the sharing economy


Figure 1: Handy Mobile Application

The founders of Handy claim that the platform is the Uber for cleaners and handymen. The platform connects service providers with households who need services (Kerr, 2016). By doing so, Handy provides value for both its providers and customers. Regarding the former, Handy enables them to take on many jobs and therefore offers them the possibility to earn additional income. Considering the latter, the platform makes the search for cleaners and handymen simple by automatically assigning a service-provider to the customer (Kletzing, 2015).

The platform of Handy is a typical example of a sharing economy platform. A sharing economy platform is a fee-based internet-platform which doesn’t have assets themselves but facilitates asset-sharing among participants. The established personal interactions are facilitated by the platform but paid by peer-to-peer transaction. To create trust and generate reputation among participants, a reputation mechanism is a requirement of a sharing economy platform (Proserpio & Tellis, 2017). 

The rising interest in using a sharing economy platform, like Handy for home cleaning and handymen services, is due to the increasing reliance on the internet and the underutilization of goods and services (Cullen & Farronato, 2018). The peer-to-peer market balances employees with unstable jobs or income and consumers with non-sufficient resources to compensate for some wanted services (Proserpio & Tellis, 2017).

Figure 2: Sharing Economy by Business Model Toolbox

The success of Handy’s business model is coherent with the rising interest in the sharing economy platforms. In order to keep growing, the company shifted their focus from cleaning services towards home repair services (Dotan, 2018).

The business model relies on the brokering of a transaction between customers and providers and thereby charging a 20% fee of each booking price. Therefore, the fee is paid by the customers who are looking for the services offered through Handy’s website. The pricing of the home cleaning services differs from the handymen services in the function of the pricing variables (Kletzing, 2015). This makes both prices varying but handymen services overall more expensive. Therefore, these services generate the biggest revenue for Handy (Handy, 2019). Most of Handy’s bookings are done by repeat customers, which shows the loyalty towards the firm’s brand. The platform takes care of this loyalty by providing excellent and trustworthy services (Cleverism, 2019). The repeat customers that use Handy’s subscription model are of huge importance for the company because they are yielding the highest profit margins for Handy. Namely, the company will no longer have to pay acquisition costs for these bookings (Kletzing, 2015).

Joint Profitability Efficiency

The value system design of Handy is efficient because of the joint payoffs for providers, customers and the firm itself. The obtained system welfare consists of the total of consumer valuation minus the costs of both the consumers and the firm (Carson et al., 1999). The customer experiences for both users within the sharing economy platform of Handy are higher than in the traditional market for cleaning and handymen services. Considering consumers of the services, the platform allows for convenience and a higher level of satisfaction. The use of the platform is convenient for customers because provider selection is removed from their booking process and executed by the firm’s technology (Kletzing, 2015). Also, customer satisfaction in terms of performance and trustworthiness is realized by their extensive feedback system (Handy, 2019). Delleart (2018) emphasizes the importance of developing mechanisms to build reputations for co-producers in order to exclude poorly performing providers. The costs for consumers are the fees paid by them. However, already in 2017, the convenience and satisfaction outweigh these costs for half a million customers (Rosenbush, 2017).

Figure 3: Cost & Benefits by CarrolPQLearning

In order to generate more profit, Handy has to satisfy providers to make customers of the services pay. For them platform is advantageous because it reduces the costs of customer acquisition and results in more job offering with flexible working hours. The costs of customer acquisition are relatively low because the platform sources the jobs for them (Kletzing, 2015). For providers, the ease of connecting to consumers when participating on the platform offers them the possibility to take on more jobs while having flexible working hours (Kletzing, 2015). According to Dellaert (2018), this is strengthened through the mechanism in which more activity will be beneficial for the collective of the consumers in the platform-network. Namely, the needs of this consumers will be better matched which subsequently results in enhanced customer experiences and more job-offerings (Dellaert, 2018).

When considering the firm itself, the positive customer experience gives them greater returns. The charged fee of 20% results in a wide margin for Handy, which means that the existence of the platform generates enough value to continue with their business model.

The Feasibility of Required Reallocations

When taking the research of Dellaert (2019) into consideration, the institutional arrangement of Handy results in the feasibility of required reallocations. Regarding Handy, this institutional arrangement compensates for the agents who would not want to make the transition to their new marketing value system design. The feasibility, which indicates efficiency, is reached through Handy’s contracting, ownership and social elements (Carson et al., 1999). First of all, the contracting of Handy is covering the commission for the service providers, which are relatively high compared to the industry’s average. A cleaner at Handy earns on average $17,55 per hour (indeed, 2019). The industry’s average for a cleaner in the US is $11,24 (payscale, 2019). Second, the ownership arrangements are in hands of Handy because the platform possesses the customer base and data (Connolly, 2015). This is beneficial for platform-users because it lowers the costs of customer acquisition and solves trust issues (Kletzing, 2015). Finally, the social components consisting of relational and reputational factors are advantages of Handy’s business model. The huge focus on user satisfactory and the implementation of an extensive feedback system show these advantages (Handy, 2019).

Figure 4: Carson et al. (1999) table 1

Based on the research of Carson et al. (1999), the three dimensions of the institutional environment of Handy is are considered macrolevel aspects for the feasibility of the required reallocation through the company’s institutional arrangement. First of all, the judiciary dimension of the US-based Handy is named ‘De Jure’, which means that it relies on democracies with greater independence (Carson et al., 1999). It supports Handy’s institutional arrangements by making contract enforcement easier. Therefore, the platform would always have to meet their promises, like 100% money-back guarantees, to the platform users. Second, the polity dimension for Handy is federal because the company is based in the US. This is not efficient for supporting the business model of Handy. Namely, not all states of the US are supportive towards their business model which hinders potential users in taking advantage of the platform (Kessler, 2018). Lastly, trust covers the dimension of social norms. The clear norms and rules of cooperative behavior in the platform-economy of the US are positively affecting the social components of Handy. This generates efficiency.

All things considered, Handy has implemented an efficient sharing economy business model which has feasible institutional arrangement and generally a supportive environmental arrangement, except for the inefficiency of the federal policy which hinders the use of the platform in multiple states.

REFERENCES

Carson, S., Devinney, T., Dowling, G., & John, G. (1999). Understanding Institutional Designs Within Marketing Value Systems. Geraadpleegd op 24 februari 2019, van https://www.jstor.org/stable/pdf/1252106.pdf

Cleverism. (z.d.). Handy. Geraadpleegd op 24 februari 2019, van https://www.cleverism.com/company/handy/

Connolly, A. (2015, 5 november). How Handy‒s founder Oisin Hanrahan is scaling his startup into an on-demand powerhouse. Geraadpleegd op 24 februari 2019, van https://thenextweb.com/insider/2015/11/05/how-handys-founder-oisin-hanrahan-is-scaling-his-startup-into-an-on-demand-powerhouse/

Dellaert, B. (2019, 19 juli). The consumer production journey: marketing to consumers as co-producers in the sharing economy. Geraadpleegd op 20 februari 2019, van https://link.springer.com/content/pdf/10.1007%2Fs11747-018-0607-4.pdf

Dotan, T. (2018, 27 februari). Handy’™s Lesson for Gig Economy Startups: Profit vs. Growth. Geraadpleegd op 22 februari 2019, van https://www.theinformation.com/articles/handys-lesson-for-gig-economy-startups-profit-vs-growth?

Handy. (z.d.). House Cleaning & Handyman Services | Handy. Geraadpleegd op 23 februari 2019, van https://www.handy.com

Kerr, R. (2016, 3 juni). How does Handy make money? Geraadpleegd op 22 februari 2019, van https://vator.tv/news/2016-06-03-how-does-handy-make-money

Kessler, S. (2018, 30 maart). Handy is quietly lobbying state lawmakers to declare its workers aren’t employees. Geraadpleegd op 22 februari 2019, van https://qz.com/work/1240997/handy-is-trying-to-change-labor-law-in-eight-states/

Kletzing, A. (2015, 6 maart). Handy: an online broker for commoditized home services. Geraadpleegd op 20 februari 2019, van https://www.hbs.edu/openforum/openforum.hbs.org/goto/challenge/understand-digital-transformation-of-business/handy-an-online-broker-for-commoditized-in-home-services.html

Proserpio, D., & Tellis, G. (2017, 28 december). Baring the Sharing Economy: Concepts, Classification, Findings, and Future Directions by Davide Proserpio, Gerard J. Tellis :: SSRN. Geraadpleegd op 21 februari 2019, van https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3084329

Rosenbush, S. (2017, 9 mei). Handy CEO Oisin Hanrahan Says Data Science Key to Startup’s Model. Geraadpleegd op 22 februari 2019, van https://blogs.wsj.com/cio/2017/05/09/handy-ceo-oisin-hanrahan-says-data-science-key-to-startups-model/+/

Netflix’s personalization taken to a whole new level?


When it comes to personalized recommendations, Netflix is a well-known player. Browse to Netflix and the first thing you see at the homepage is content adjusted to your interests, preferences and previously watched series and movies. The banner, carousels, the order of the shows, the text and the search: everything is personalized. These “recommendations for you” are not something new or special as you might think. Indeed, Netflix is not the only one who made personalization an important part of their business strategy. However, Netflix has recently stepped up their game when it comes to personalization.

By the end of 2018, Netflix announced that viewers will be able to choose the next storyline in an episode of a TV show or movie. On December 28th, Netflix released a 90-minute episode of Black Mirror: Bandersnatch. During different moments in the movie, the viewers get to decide how the story will continue. Is this the new innovative idea when it comes to customer experience and personalization?

Netflix as a well-known player in the market

Netflix is one of the first companies that saw the potential of streaming technology. Since 2007, when the company started with a subscription video-on-demand model, the service has reached over 130 million users in 2018 (Statista, 2019). According to Gomez-Uribe & Hunt (2015) an important aspect of the service of Netflix is the recommender system. Through the recommendation systems the users of Netflix can easily find videos to watch in every session.

Gorgoglione et al. (2019) argue that recommender systems are of strategic importance for online businesses. Recommendation systems refer to “web-based tools that tailor vendor’s offerings to consumers according to their preferences” (Li & Karahanna, 2015). The value of this personalized offerings can be seen in the fact that 80% of hours streamed by the customers of Netflix are determined by their recommendation algorithms (Gorgoglione et al., 2019). Since there are several kinds of recommendation engines with different performance metrics such as accuracy, novelty, diversity and trust, Netflix tries to search for the best algorithm (Gorgoglione et al., 2019. Next to this, Netflix is trying to handle issues related to the increasing number of customers and especially how to handle enormous stream of big data.  

“The personalized homepage of Netflix”

A new interactive viewing experience

One of the ideas Netflix recently incorporated, is thus a new interactive viewing experience for the users of Netflix. As this idea is not completely new and Netflix already offered this experience with children shows, the movie “Bandersnatch” is the first interactive show for adult viewers ánd the first big success within this format. Bandersnatch is a 90-minute episode of the Netflix series Black Mirror. Black Mirror is known for its critical commentary on technological developments and its impact on culture and society. In Bandersnatch, the viewers guide the protagonist Stefan through the episode by making a series of decisions (Ralph, 2019). These decisions influence Stefan’s life, experiences and mental state and result in different endings. The decisions that the viewers need to make differ from choosing between what Stefan has to eat for breakfast (Frosted Flake or Cheerios) or whether he has to jump off a balcony (Ralph, 2019).

“One of the choices in Black Mirror: Bandersnatch”

What is the value for Netflix?

What is interesting about this business model is that this form of interactive experience offers new data insights for companies such as Netflix. According to Damiani (2019), Netflix uses the gathered data from the user participation to create an internal programmatic marketing infrastructure. Since the viewers need to make real-life decisions about for example their product preference (such as the choice between the cereals), musical taste and engagement with human behavior, an individual personalized pattern can be discovered. Moreover, how users handle certain decisions (for example if Stefan has to jump off the balcony) offer insight about what the viewers want out of a story and what they want to see the characters in a story do (Damiani, 2019).

By analyzing this data, Netflix could even better personalize the content, but also associate products with specific content or demographics. An example that Damiani (2019) mentions is that the frosted flakes cereals could be associated with, for example, 18 to 24 years old men. This way, effective targeted advertising could take place. Another interesting part of the business model is that Netflix could work together with different brands to test their product designs. Think of the already described example of the breakfast cereal boxes as shown to the viewer with two different box covers.

What’s in it for the customer?

But what is the efficiency of the business model? What is the value for the customer? First of all, the experiences of the series are tailored to the needs and interests of the customer. Each customer has an individual and unique experience as they have to choose between different narratives. Moreover, it is interesting that in the example of Bandersnatch, the customer experiences a sense of power and control. Research have shown that increasing user experience increases user’s confidence in their ability to perform their tasks (Nysveen & Pedersen, 2004). By choosing between different options and determining how the story will unfold, the customers are in charge and can make the choices for themselves.  

It is interesting that the joint profitability of this business model is visible to both the customer and Netflix. With the interactive experience and thus through active customer participation and engagement, Netflix tries to uncover the hidden needs of the customers. As a result, Netflix can use this creative potential of their customers in new product and service development (Saarijärv et al., 2013). What is striking is that Netflix in fact guides the customers through different predefined choices creating the ‘illusion of free choice” (Ralph, 2019). Customers get the feeling that they are in control in the sense that they can literally determine whát and how they experience the content. Moreover, customers engage in personalized and unique experiences and eventually receive more content tailored to their preferences. Thus, through active customer participation the customers and Netflix together create greater value. However, the future will tell if this idea will pull off and will be long-lasting.

References

Damiani, J. (2019). Black Mirror: Bandersnatch could become Netflix’s secret marketing weapon. Retrieved 23-02-2019 from https://www.theverge.com/2019/1/2/18165182/black-mirror-bandersnatch-netflix-interactive-strategy-marketing.

Gomez-Uribe, C., & Hunt, N. (2015). The Netflix Recommender System: Algorithms, Business Value, and Innovation. ACM Transactions on Management Information Systems, 6(4).

Gorgoglione, M., Panniello, U., & Tuzhilin, A. (2019). Recommendation strategies in personalized applications. Information & Management.

Li, S., & Karahanna, E. (2015). Online recommendation systems in a B2C E-commerce context: a review and future directions. Journal of the Association for Information Systems, 16(2), 72-107.

Nysveen, H., & Pedersen, P. (2004). An exploratory study of customers’ perception of company web sites offering various interactive applications: moderating effects of customers’ Internet experience. Decision Support Systems, 37(1), 137-150.

Ralph, A. (2019). What Black Mirror: Bandersnatch teaches us about personalization. Retrieved 23-02-2019 from https://www.heyday.ai/what-black-mirror-bandersnatch-teaches-us-about-personalization/.

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

Statista. (2019). Retrieved 23-02-2019 from https://www.statista.com/topics/842/netflix/.


Moovit – The future of urban mobility?


By Denis Ceric, 410688

While public transport itself has not changed that much in recent years, the way in which we find information about public transport has. Here in the Netherlands, I can not imagine taking the public transport without looking at either Google Maps or 9292. However, there might soon be an addition to this small list, going by the name of Moovit.

Moovit is a “leading Mobility as a Service provider and the world’s #1 transit app” (Moovit, 2019a). Moovit combines information from public transport operators with live information gathered from their passionate user community. This user community has been dubbed the “Mooviter Community” and helps mapping and maintaining local transit information in cities that could otherwise not be served by the app (Moovit, s.d.). Moovit themselves dub this community the “Wikipedia of Transit” (Moovit, 2019a). Moovit has over 330 million users across Android, iOS and the web, their app is fully localized to 44 languages and they offer their service in over 2,700 cities across 87 countries (Moovit, 2019a). In addition to this, their community of Mooviters counts over 500,000 members, with another 150 employees working for Moovit itself (Moovit, 2019a).

Why Moovit over alternatives?

This large community is one of the largest reasons why Moovit is likely to surpass alternatives such as Google Maps on a global scale. The CEO presented that Moovit amasses up to 500 million anonymized data points a day from transit riders, which they then combine with data gathered from their Mooviter community (Moovit, 2017a). Additionally, thanks to this data, they offer precise and hyper-local transit data that allows them to provide real-time data for thousands of transit operators worldwide in cities where Google does not, such as Hong Kong, Istanbul, Madrid or even Paris (Moovit, 2017a). Next to this, where Google plots (bus) stops using official transit data, Moovit combines this data with their own technology and community of users to avoid inaccuracies (Moovit, 2017a). The community not only allows Moovit to gather the precise location of the stops where people enter, they also sends active reports about their travel experience, such as bus congestion levels, cleanliness and more (Moovit, 2017b). This combination of data leads to the following analytics:

Figure 1: Moovit Urban Mobility Analytics. Source: (Moovit, 2019b)

This provides for an easy to use app for consumers, but all this data gathered also provides a clear business case for Moovit to convince cities to support their app. With these analytics, Moovit offers cities more reliable data than traditional surveys, faster analysis, granular insights and a rich visualization (Moovit, 2019b).

The future of Moovit

All of the above has played a large in securing a total funding of $131.5 million over four funding series, including a number of notable companies such as Intel Capital and BMW i Ventures (Crunchbase, 2019). Despite such a large amount of funding, they have not gathered much revenue to this date. However, this might soon change, as the founder of the app notes that they will be switching from a focus on growth and coverage to making money through selling data (Solomon, 2018). Building on this, they have already closed deals with multiple cities in Europe and are in talks with cities in Latin America (Solomon, 2018). In addition to this, they are preparing for the future of autonomous vehicles in cities and believe that they will play an instrumental part in making cities ready for these autonomous vehicles (Solomon, 2018).

However, whether this passionate user community will remain as passionate when Moovit starts selling all of their data and becomes the Facebook of public transport has to be seen. Amidst growing privacy concerns across the globe, Moovit will have to tread carefully in order to not suffer from backlash. Moovit, however, themselves appear to be aware of this and are taking user privacy seriously. To use Moovit, you are not required to make an account, they are GDPR compliant, all data is anonymized and all analytics are anonymized as well (Meydad, 2019). As such, what the future holds for Moovit, nobody really knows. But, it does not appear as if they will be slowing down their growth as long as they continue the way they have been.

Link to theory

Looking at the four types of crowdsourcing, I argue that Moovit’s app is mostly a form of information pooling but also has some open collaboration elements (Blohm, Zogaj, Bretschneider & Leimeister, 2018). The tools provided by Moovit make it quite easy for Mooviters to provide the data required to map the public transport in a specific town or city, thereby creating quite simple tasks for the Mooviters (Blohm et al., 2018). While the end result provided by Moovit in the app is quite complex, the individual contributions of the community are not, as most data is simply gathered through the app and not much else has to be done in these cases (similar to Google Maps, a prime example of information pooling). However, as mentioned earlier, the community does provide added value by taking into account individual user contributions, such as pictures of bus stops and reports of their travel experience (Moovit, 2017b).

Looking at the recommendations of Blohm et al. (2018) for governance mechanisms for information pooling crowdsourcing platforms, Moovit follows most of them. They provide clear contribution requirements, they have a demographic-based allocation of tasks (as users map the area around them), they make use of reputation systems and framing (e.g. by recognizing extraordinary Mooviters as “Ambassadors” and providing them with goodies and opportunities to meet other ambassadors at exclusive events), and by providing tutorials (Moovit, 2018). Next to this, recommendations by Dellaert (2019) can also be found in Moovit, as the consumers of the map are often also co-producers. The increase in customers’ joint payoff at a network level is most relevant (Dellaert, 2019). The establishment of the community itself, rather than having each user of the app contribute, is an example of this. By encouraging users to join this network and become active in the network, greater utility for the total network is achieved (Dellaert, 2019).

Efficiency criteria

Lastly, I will briefly evaluate this crowdsourcing approach using the efficiency criteria. I believe the joint profitability is currently efficient, but there could be a greater recognition of their Mooviters and for the future, monetary rewards might be in place. Currently, I believe it is efficient as Moovit is not really generating any revenue so it would not make much sense to use their funding to pay their community, but once the selling of data gathered from this community is implemented throughout the platform, it would make sense to share some of this with these Mooviters, whose data is being sold.

In terms of feasibility of required reallocations, I believe it would be relatively difficult to establish the necessary institutional arrangements and institutional environment for most competitors. This is mainly due to the fact that location-based data is gathered continuously, which could lead to large privacy concerns and trust issues among users. Additionally, the largest strength of Moovit’s crowdsourcing approach now is the large network of Mooviters they have built, and the network effects that come with such a large network (in addition to the map they have built using this network). As such, this would only really be feasible for a large company with an established network and the ability to adhere to the instutional arrangements and environment, such as, for example, Google.

References

Blohm, I., Zogaj, S., Bretschneider, U. , Leimeister, J.M. (2018): How to Manage Crowdsourcing Platforms Effectively? in: California Management Review, Vol 60, Issue 2, p. 122-149, doi: 10.1177/0008125617738255

Crunchbase (2019). Moovit. Retrieved February 23, 2019 from https://www.crunchbase.com/organization/moovitapp#section-company-tech-stack-by-siftery

Dellaert, B. G. (2019). The consumer production journey: marketing to consumers as co-producers in the sharing economy. Journal of the Academy of Marketing Science, 1-17.

Meydad, Y. (2019). Supply and demand: how data collection and analysis became the key to unlocking MaaS. Retrieved February 24, 2019 from https://www.intelligenttransport.com/transport-articles/74591/transport-data-maas-solutions/

Moovit (2017a). Moovit “Eclipses” Better-Known Services Like Google Maps. Retrieved February 23, 2019 from https://moovitapp.com/blog/moovit-versus-google/

Moovit (2017b). Moovit Press Factsheet November 2018. Retrieved February 23, 2019 from https://docs.wixstatic.com/ugd/c729fe_82d633f838e44572a129d75ce2e31eaa.pdf

Moovit (2018). Commuter Kate: How To Make A Difference In Your Community. Retrieved February 24, 2019 from https://moovitapp.com/blog/community-crowdsourcing/

Moovit (2019a). About. Retrieved February 23, 2019 from https://www.company.moovit.com/about

Moovit (2019b). Origin-Destination Visualizer. Retrieved February 24, 2019 from https://www.solutions.moovit.com/origin-destination-visualizer

Moovit (s.d.). Join the Mooviter Community. Retrieved February 23, 2019 from https://editor.moovitapp.com/web/community

Solomon, S. (2018). Israeli founder of Moovit app sees himself as the ‘Marco Polo of transit’. Retrieved February 24, 2019 from https://www.timesofisrael.com/israeli-founder-of-moovit-app-sees-himself-as-the-marco-polo-of-transit/

The future of auditing and market research through crowdsourcing (Business case – BeMyEye)


Context

Auditing and market research are important for companies to get an insight into how they perform in the market. When doing an audit suppliers often check if retail stores keep to the agreement which they make, such as the display of a product for instance. With market research companies gather deeper insights about costumers’ needs and preferences, to be able to make strategic decisions for the future. Although both insights are valuable for companies, these methods are not always practiced due to their high costs.

Unique proposition of the business idea

BeMyEye is a research company that offers a platform where companies can obtain street-level data from physical stores, through crowdsourcing. Within this platform, these companies, which are called the ‘clients’, offer tasks to the users of the platform. This obtained data is used the clients in various ways such as; to check whether stores are fulfilling their arrangements, how prominent their products are being displayed, how much stock there is still available from a particular product, and to collect street-level data for mapping enrichments or to identifying new opportunities for the company. This type of crowdsourcing is called information pooling. Within this type, contributions are characteristically identical and the crowd is usually asked for their opinions or to gather location-based information (Blohm, Zogaj, Bretschneider & Leimeister, 2018). This revolutionary way of auditing and market research is interesting for companies because it has a high degree of reliability and is much more efficient and cheaper than current methods. This reliability is partly obtained by deliberately allocating the tasks among a large group of people with both customers and non-customers of the product. Customers who also use the product, to which the task relates, could be positively biased when they provide the client with their perceived data, because they could be a huge fan of the brand.

Promotion video BeMyEye

BeMyEye’s business model and how it works.

BeMyeye uses a two-sided platform. On one side of the platform are the companies which offer various tasks which they call ‘clients’. Examples of well-known clients include Nestle, Samsung, Heineken, Lavazza, and Coca Cola. And on the other side are the BeMyEye app users which are called ‘the eyes’, these eyes could be described as ‘secret shoppers’. As soon as the clients need information about certain things in the market, they write a task and set a reward for completing this task. When the consumer logs in on the app on his phone, he sees where there are tasks in the vicinity of his current location and which rewards have been allocated. Assignments often include submitting photos of certain shop displays and completing a corresponding questionnaire. One of the newer tasks that can be assigned on BeMyEye is checking your brand reputation. Here, the eyes reveal the preferred brand choices and reasons of influential retail staff, such as a pharmacist, when approached by customers. When eyes start with an assignment, they check with their current location at the destination of the task as proof that they are in the right place, then they answer the questions the app asks them (O’Hear, 2018). These questions function as a step-by-step guide to be able to standardize the collation of the data which the clients receive. Fees usually vary from three to sixteen euros depending on the duration and level of difficulty of the assignment. After the assignment has been carried out, it needs to be verified, and when everything is fine, the eye will receive his reward and will be paid directly. In this way, companies can quickly obtain data from multiple geographical locations and no longer have to hire auditors who physically go to stores, which is often time-consuming and inefficient. In this way, companies can reduce their related costs, which can significantly improve their ROI for these business activities. This is an interesting concept for the eyes because they can quickly earn some extra money while already being at a certain location. BeMyEye earns money within this concept through a certain fee per completed assignment that they receive from the companies.

Appearance BeMyEye app

The rapid growth of the company and future use of their products

BeMyEyes now has more than 1.5 million active data gatherers in more than 21 countries and are currently the largest crowd of real-world data gatherers in Europe. In order to enlarge the network, BeMyEye uses an aggressive strategy to quickly obtain more data gatherers. They do this by offering people a new way to earn something in a fun way, and by acquiring similar business models that have large numbers of active users.  They started with this strategy in 2016 when they acquired Local Eyes, which was a similar French mobile crowdsourcing app. Shortly after that, they acquired other competitors such as Task360 in 2017 and Streetbee at the start of 2019 (O’Hear, 2019). With these acquisitions, they did not only take over the business models and users, but also the supporting employees, who helped the company grow even faster due to shared knowledge. These acquisitions are financed with money that the company has raised in several new financing rounds. Now, the company’s biggest focus is to maintain its market position in Europe and to enter the US market to further expand its platform (Kharpal, 2016).

Nowadays, most questions the eyes get while performing a task are easy to answer and do not require any knowledge about the products. However, the question is how far could BeMyEye go. To what extent are ‘normal’ people capable of answering questions that need a certain level of interpretation or expertise? And how can BeMyEye guarantee that the questions which are asked to the eyes are correctly interpreted?

I think this way of auditing will become the standard for consumer products in retail stores because of its efficiency and low costs.  However, it should be examined in the future to what extent ‘normal’ people can be used for these tasks, or how they possibly could be trained.

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Sources

Blohm, I., Zogaj, S., Bretschneider, U., & Leimeister, J. M. (2018). How to manage crowdsourcing platforms effectively?. California Management Review, 60(2), 122-149.

Kharpal, A. (2016, May 19). BeMyEye, an ‘Uber for mystery shoppers’ app raises $7.2M and eyes US expansion. Retrieved February 23, 2019, from https://www.cnbc.com/2016/05/19/bemyeye-an-uber-for-mystery-shoppers-app-raises-72m-and-eyes-us-expansion.html

O’Hear, S. (2018, January 16). BeMyEye, the startup that lets companies crowdsource in-store data, acquires rival Task360. Retrieved February 23, 2019, from https://techcrunch.com/2018/01/16/bemyeye-task360/?guccounter=1

O’Hear, S. (2019, January 16). BeMyEye acquires Streetbee, a Russian crowdsourcing and image recognition provider. Retrieved February 24, 2019, from https://techcrunch.com/2019/01/16/bemyeye-acquires-streetbee-a-russian-crowdsourcing-and-image-recognition-provider/

How PSD2 is changing the financial industry


After the development of Internet Banking, and Mobile Banking, the European Union has now paved the way for Open Banking. ‘Open Banking’ is the relatively new umbrella term for opening the bank to other parties to access customer data (Courbe, 2018). The Payment Service Directive (PSD), enforced in 2007, is revised recently with the aim to stir innovation and emphasize consumers’ protection by increasing security and transparency through enhanced know-your-customer capabilities, identity validation, and fraud detection (Brodsky & Oakes, 2017). The new European legislation: ‘The Payment Service Directive 2 (PSD2)’, which became applicable in January 2018, sets the banking industry into motion by shifting the authority to share data from financial institutions to bank customers by the rule of: access to account (European Commission, sd). Under PSD2 large financial institutions may move towards the background, maintaining the back-end systems, where digital “giants” are able to extend their close customer relationships by fulfilling the specific customer needs by adding digital value-added services on top of the bank, leading to more competition, digital payment methods and lower transaction costs for consumers (McKinsey, 2016). These digital ‘giants’ like  Amazon and Google, are now able to directly access bank customers and collect the final piece of data that was not accessible before. This could lead to end-to-end solutions that complete the circle of services offered by these parties (PWC, sd).

The Payment Service Directive 2 (PSD2)

Two new categories of licences are created: the Payment Initiation Service Providers (PISPs), which enables third parties, if permission is granted, to directly initiate payments at the bank on behalf of the customer; and the AISP (third party account information service providers), multiple accounts of various banks can be combined into one interface (Deloitte, 2016). By establishing a single legal framework for payments within the EU, cross-border payment transactions can be made as easy, efficient and secure as the domestic payments in Europe (European commission, sd). In this way, the directive lowers entry boundaries of the payment market and thus competition increases. Efficiency is reached by standardization of rules, which results in lower transaction costs and improved financial services. Though, new entrants must meet strict technical requirement set by the European Banking Authority. The customer-centric legislation aims for increased security and transparency of Third-Party Service Providers (TPSPs) as well as banks towards customers. Newly non-banking solutions can be offered as well; payments via digital channels such as social media (Noctor, 2018).

By giving Third-Parties their consent, customers have to trust the Third-Party first, but consumers may not be able to assess the same value and sensitivity to certain data elements as banks and regulators do (Brodsky & Oakes, 2017) as they can be blinded by the benefits that a certain payment service of a TPSPs provides. Thus, the customer-centric regulation results in a cost-benefit trade-off concerning the ability to utilize more efficient and improved bank services, while putting one’s own privacy at risk. New consumer-payments relationships in the financial industry raises the need for a better understanding of how to build consumer trust over the internet. Are bank customers willing to share their personal financial information with TPSPs in return for improved financial services or personalized financial applications? In other words, do the benefits outweigh the risks of sharing your financial data? The following paragraphs explain the advantages and disadvantages of the PSD2 along with related developments in banking.  

Personalization of the financial industry

In today’s world, personalization in e-commerce is rather a must than a nice to have. The future of the financial industry will follow the e-commerce sector by responding to the financial needs of consumers through new types of payment services delivered by Third-Parties’ interfaces on top of banks’ existing data and infrastructure. The PSD2 enables, for example, PayPal to provide additional services on top of the banks infrastructure in which the bank customer barely interacts with their own banking institution. This can threaten banks since PayPal can access multiple bank accounts of bank customers, if consent is given, and can thus collect more information on customers. The information can then be used to fulfill the customers’ needs. In this way, banking services can be offered in a more personal way. In contrast to banks, Third-Parties have the benefit that they can specialize on specific needs of consumers since they do not have the burden of meeting all of the needs of the consumers (Deloitte, 2016). Though, Third-Parties still need to be granted access to the banks’ interface through API’s (Application Programming Interface) provided by financial institutions to interact with bank accounts to third-parties. Although the customer centric, mobile and swift nature of TPSP services is in conflict with how banks traditionally operate, banks have the opportunity to differ between basic and advanced API’s in order to generate a new stream of revenue. Banks expect to face the most significant challenge, not from new digital banks or fintechs, but from the consumer tech giants such as Google, Facebook and Apple. Apart from the end-users’ financial information, these firms were able to access almost every other part of personal information that is available on the internet.

Another important element of banks is their reputation and institutional trust that they have gained over the years. Though, the image of some banks have been harmed in the past years (Volkskrant, 2018), banks do invest heavily in security because their reputation is at stake. TPSPs on the other hand, do not possess a similar security foundation because it was not possible to access bank customers’ accounts or initiate payments on behalf of the customer. However, in the online context, uncertainty increases as users are not aware of the consequences associated with sharing of personal financial information, including account information, obtained financial services and transaction data. Consumers are not likely to share highly sensitive data because of perceived privacy concerns that are due to the invisible nature of the online environment (Culnan & Armstrong, 1999). Thus, e-commerce and consumers are confronted with more payment options, but this does not necessarily benefit to the level of confidence in the payment system, because too much fragmentation of providers can also increase uncertainty and therefore uncertainty among consumers. Then again the conversion at online retailers can have a negative effect in addition to potential market saturation and regulatory burdens which can become another challenge for TPSPs. (Deloitte, 2016). The customer-centric legislation may in the end not be so customer-centric concerning the potential market saturation and the corresponding privacy concerns in the uncertain online environment.

The rise of ‘Digital Giants’ in banking

Currently Google has its primary payment method Google Pay which is a digital wallet that offers a limited number of financial services. As of january 2019, Google has been granted the new payment license in Ireland and Lithuania (Finextra, 2019), which enables them to access bank customers’ account and initiate payments on behalf of the bank customers Although Google did not publish any new service ideas yet, efficiency gains can be made by providing convenient interfaces and features that banks do not offer. These potential services can be combined or linked with existing products, resulting in end-to-end solutions. In this way digital giants are empowered to complete the circle of services offered by these parties. In sum, banks have their brand image and the in-house security foundations as strategic assets, whereas Third-Party Service Providers (TPSPs) have the flexible nature to adapt quickly to customers’ needs. Instead of entering the red ocean, banks can leverage their assets and strengthen their position by collaborating with fintechs and digital giants. Especially, in the uncertain online environment where risk is inherent, trust becomes an important factor. Collaboration is thé solution in the customer-centric world of today. Google has already announced that they prefer to work with banks instead of continuing by themselves. Under the PSD2, Europe puts the customer first and customer protection is number one priority. It is a starting point for change in the traditional financial industry.

References

Brodsky, L. & Oakes, L., 2017. Data sharing and open banking. [Online] Available at: https://www.mckinsey.com/industries/financial-services/our-insights/data-sharing-and-open-banking [Accessed 18 february 2018].

Courbe, J., 2018. Building ‘Open Banking’ on a Platform of Trust. ABA BANKING JOURNAL , pp. 38-39.

Culnan, M. J. & Armstrong, P. K., 1999. Information Privacy Concerns, Procedural Fairness, and Impersonal Trust: An Empirical Investigation. Organization Science, 10(1), pp. 104-115.

Deloitte, 2016. Anticipating the challenges and opportunities of the PSD2. Inside, June, pp. 60-65.

European Commission, n.d. Payment services. [Online] Available at: https://ec.europa.eu/info/business-economy-euro/banking-and-finance/consumer-finance-and-payments/payment-services/payment-services_en [Accessed 18 february 2018].

Finextra, (2019). Google gets payments licence in Ireland. [Online] Available at:https://www.finextra.com/newsarticle/33167/google-gets-payments-licence-in-ireland [Accessed 22 february 2019].

McKinsey, 2016. Technology innovations driving change in transaction banking. [Online] Available at: https://www.mckinsey.com/industries/financial-services/our-insights/technology-innovations-driving-change-in-transaction-banking [Accessed 18 february 2019].

PWC, n.d. PSD2 stimuleert slimme authenticatiemethoden banken. [Online] Available at: https://www.pwc.nl/nl/themas/blogs/psd2-stimuleert-slimme-authenticatiemethoden-banken.html[Accessed 17 february 2018].

Volkskrant, (2018). Ministers wil schandalen zoals bij ING voorkomen en scherpt beloning van bankiers verder aan. [Online] Available at: https://www.volkskrant.nl/nieuws-achtergrond/minister-wil-schandalen-zoals-bij-ing-voorkomen-en-scherpt-beloning-bankiers-verder-aan~b37cfd78/?referer=https%3A%2F%2Fwww.google.com%2F[Accessed at 22 february 2019]


Symbaloo: from homepage website to educational tool


Symbaloo is an internet based company with 15 million users whose product is a homepage. On Symbaloo, people can click tiles that link them to their favorite websites or generate helpful tools on the website itself. People can choose to either use the standard homepage or to customize their own page (Symbaloo, 2019).

symb1
The (dutch) standard homepage of Symbaloo

The unique value that Symbaloo offers to their customers is defined in two terms: simplicity and customizability. Symbaloo mostly targets two groups of people. Firstly, the digital immigrants. This group consists of the more elderly people who have a rough time navigating the internet, who are mostly appealed by the simplicity of the website. Secondly, the digital natives. This group consists of younger people who are already sufficiently experienced with the internet and are more appealed by the customizability and the visibility of the website. (Prensky, 2001)

Symbaloo has to thank most of its users to customer centricity. Symbaloo has put a lot of effort in understanding who their customers were, why they were using Symbaloo and what the most important value was. This centricity was eventually the most deciding factor for most of the digital immigrants, who had trouble getting started on the internet by themselves. Symbaloo acted as a fallback for when users had troubles with using the internet, resulting in a lot of interactions by phone or by email.

The business model of Symbaloo consists of four different aspects:

  1. The tiles at the homepage are sold to advertisers. Although it wasn’t specified that these tiles were sponsored, the tiles were highly successful, regardless of the fact that they were promoted by a biased recommendation agent.
  2. Symbaloo sells PRO accounts for a fee, which offer more functionality than the free standard accounts
  3. The searches in the google search engine (in the middle of the page) generate referrals for which advertisers pay (through google). This search engine also contains sponsored recommendations, which are displayed as natural results and were also equally successful as other search results, regardless of being promoted by a biased recommendation agent. The working of the tiles and the search engine contradict the results of the research by Wang, Xu and Wang, who mention that the sponsorship should probably have been disclosed. (Wang, Xu & Wang, 2018).
  4. The wallpaper in the background, which either displays a beautiful picture or an advertisement .Personalized information was used to decide who gets shown what wallpaper. For example, some wallpapers were only shown to either males or females. It was not disclosed that this info was used, but it did lead to higher click to rates per view than when the advertisements were not personalized, which somewhat contradicts the research of Aguirre et al. (2015).

symb2
The homepage of Symbaloo with a (personalized) advertisement in the background

The business model of Symbaloo works well on the short term, but is not sustainable on the long term. As time goes on, the amount of digital immigrants will reduce and the amount of digital natives will increase, which means that the advertisements and the unique proposal they have now will have to be changed. The problem with the business model as it is now, is that most digital natives have little desire to use a homepage other than the standard google or bing for example. For the digital immigrants, Symbaloo offered simplicity, which was a necessity for some to be able to properly browse the internet. However, as digital natives do not experience the same limitation, the value of that simplicity becomes far less. In other words, the growth of the homepage of Symbaloo has stagnated. (Prensky, 2001)

The workings of the business model become more visible when looking at the BCG matrix. The BCG matrix is a matrix in which products are placed in any of 4 areas, defined by the dimensions market share and market growth. For Symbaloo, the homepage would be a cash cow, as they have quite a lot of users, but the growth has stagnated as mentioned before. Because of the lack of growth, Symbaloo is in danger of going out of business. In order to survive on the long term, Symbaloo has ventured into an entirely new branch: education. Symbaloo is looking to use their existing environment, userbase (a lot of users were educational users) and current knowledge in order to become a big party in online education environments. At the moment, the educational application is still starting up and growing fast (question mark on the BCG matrix), which requires a lot of investments. These investments were funded by the earnings of the homepage. (BCG, 2014)

bcg
The BCG matrix

Symbaloo nowadays offers two unique propositions to the educational world. The educational product (http://www.lessonplans.symbaloo.com) offers crowdsourced content creation in the form of lesson plans, which become available online. These lessonplans are about a single subject, i.e. Napoleon, Vulcanism, or Microsoft PowerPoint, and are created and used by the teachers themselves. The lessonplans are crowdsourced and marketed as such, which according to Nishikawa et al. (2017) increased its performance. Besides that, there is also the customizability. Symbaloo sells packages to schools, which allow them to fully integrate created lesson plans and other learning environments into their own single Symbaloo page. In other words, Symbaloo creates a personalized product for each different customer, which has proven to be very valuable to schools and school communities all around the world.

The story of Symbaloo includes both success and failure. Where the original product and their original value have been mostly deprecated, the expertise and developed environment have remained very relevant in the value that Symbaloo offers to their customers nowadays. Customizability and crowdsourced content creation are the two pillars on which Symbaloo continues to thrive nowadays. The company is one of the many examples that have shown the importance of customer centricity nowadays and its effects on the fate of companies.

 

Sources:

Aguirre, E., Mahr, D., Grewal, D., de Ruyter, K. and Wetzels, M. (2015). Unraveling the personalization paradox: The effect of information collection and trust-building strategies on online advertisement effectiveness. Journal of Retailing, 91(1), 34-49.

Boston consulting group. (2014). BCG Classics revisited: The growth share matrix. Retrieved from https://www.bcg.com/publications/2014/growth-share-matrix-bcg-classics-revisited.aspx

Nishikawa, H., Schreier, M., Fuchs, C. and Ogawa, S. (2017). The value of marketing crowdsourced new products as such: Evidence from two randomized field experiments. Journal of Marketing Research, 54(4), pp.525-539.

Prensky, M. (2001). Digital Natives, Digital Immigrants. On the Horizon,  NCB University Press, 9 (5), October 2001.

Symbaloo, (2019). What is Symbaloo? Retrieved from https://en.help.symbaloo.com/portal/kb/articles/what-is-symbaloo-22-2-2018

Wang, W., Xu, J. and Wang, M. (2018). Effects of Recommendation Neutrality and Sponsorship Disclosure on Trust vs. Distrust in Online Recommendation Agents: Moderating Role of Explanations for Organic Recommendations. Management Science, 64 (11), 5198-5219.

 

Note: most of the information about Symbaloo, their business model, history and way of working is based on my experience of working there (2017), of which there is no online source available.

Written by: Oskar Sabel, 414014os