All posts by 356509lr

The Perils of User-generated Content and Incomplete Institutional Arrangements

Valve Corporation, the company that touts itself to be “boss-free since 1996” when it was founded may have just found its boss. After an announcement to allow creators of user generated content for the game Skyrim to charge for content on their Steam platform, they were met with great backlash from the community on the platform. A petition on gathered 133,000 signatures in a week and according to CEO Gabe Newell the mods have generated only ten thousand dollars in revenue compared to the million and more it costs for them to address the negative feedback. Users, both players and creators, had their concerns about the dynamics of such a model, leading to removing the feature from Skyrim, refunding purchases, and reconsideration of the whole concept on Valve’s part.

Creative gamers have for long formed a subgroup of “modders”, players and/or developers who design modifications or “mods” to existing games ranging from visual design elements to totally changing the nature of the gameplay. Steam has helped to bring their designs accessible to users on the platform in their Steam Workshop and wanted to extend this relationship to where both could profit.

To roll out the feature they partnered with Bethesda, the company behind the Elder Scrolls series of games and the latest release Skyrim. Skyrim mods placed in the Steam Workshop, could now be available either for free as it has been before, for a price or sold with a pay what you want model. The economics of the model for the parties involved is described by Bethesda to follow industry standards. Valve receives 30% much like iTunes and Google Play Store would. The rest Bethesda split by looking at the earnings of both developers in-house and the external creators. They settled for a 25% cut for the creator and 45% to Bethesda. After all they provide the original game and most of the tools used to create the modifications for the game they argued.

Both Valve’s and Bethesda’s intention according to their statements was to increase the quality of the mods released. If looked at from the perspective of the marketing value system used in the article by Carson et al. the change to a paid model was successful in adapting to a new judiciary environment and political elements involved. The intellectual property rights of derivative content needed to be thought through in a process that took Valve three years.

The social norms involved with purchasing products, compared to using content someone has created for free are quite different. Paying for a product comes with the expectation that it is supported and works according to the description. Valve and Bethesda expected the content to become better as the creators would work to this arrangement. Modders and players disagreed and pointed to many of the institutional arrangements that would not support this. Bad product would be brought to the market as there is a financial incentive rather than an incentive to provide a positive contribution to the community. If anyone could push content to the market, it would be hard to determine the quality of the products within the 24 hour return period Steam allows. Mods can also be downloaded from a multitude of websites, so there is potential for someone to download a mod and sell it as their own on the platform.

Looking at the remediable efficiency criteria, the modders did not find the joint profit allocation of the new model to be fair based on their effort and time utilized. The interdependence of many mods could lead to great user dissatisfaction, although pushing the new model forward to users efficiently. Players would be required to purchase mods that the mod they intended to download for free for was based on.

The backlash did not only bring about negative comments, but potential arrangements Valve could implement to ensure only good quality user generated content is sold. Many favoured a tiered rating and review system to be implemented, so that only modders whose content has been downloaded often and reviewed positively could sell their mods.

The institutional arrangements Valve attempted to implement were not detailed enough to cover for situations the users had thought of. Now that they have a dump truck of emails to go through, hopefully in that pile they will find the right mix of arrangements to cover the concerns of the community.

Stephen J. Carson, Timothy M. Devinney, Grahame R. Dowling and George John Source: Journal of Marketing,Vol. 63, Fundamental Issues and Directions for Marketing (1999)

Screenshot from Steam’s announcement.

How do you find consumers to create value with? Try automating!

Automated Marketing Research Using Online Customer Reviews

When shopping online, consumers often read several reviews of products they discover and many times base their decisions to purchase on the information provided by reviews. Research covered in class focused on the elicitation of ratings and reviews from consumers and ensuring they are valuable to the consumer. Reviews are not only beneficial for the consumer and there are distinct benefits that companies can extract directly from the information in the reviews.

In their study Lee and Bradlow (2011) use text-mining techniques to automate the analysis of customer reviews, forming valuable information for use in market research. Previous studies have not covered the analysis of market structure through reviews to describe the environment surrounding a business. Market structure analysis is an important part of the market research process, as many of the marketing decisions rely on information about existing the existing market; the potential substitutes and complements for the product. In order to form these market structure analyses, attributes of products are commonly mapped to represent different brands.

The study utilizes simple methodology to suit capabilities of marketers better; by combining techniques commonly used and less complex language processing. The techniques chosen do not require predefined product attributes to be tested which is how current market research commonly approaches eliciting these attributes. The authors’ rationale is to allow the methodology to be used repeatedly, so that analysis “can be done (unlike traditional methods) continuously, automatically, inexpensively, and in real time.”

The authors’ collected all digital camera reviews on the platform between  July 2004 and 2007. By clustering attributes detected in product reviews into common attributes, the authors’ were able to compare these attributes to attributes found in expert buying guides. What they found when comparing the opinions of experts, interestingly, was that they have no consensus in what attributes of a product are seen as important. In their comparison study they found attributes from analyzed reviews to be more valuable to the respondents and discovered new attributes.

To prove the use of their methodology in forming overviews of market structure repeatedly, the authors’ ran the analysis on a parallel data set they collected from reviews in between 2005 and 2007. This showed interesting results as the changes in attributes matched the changes seen in the market in terms of company strategies and consumer tastes. When Nikon changed its marketing from promoting technical specifications to a more product benefit focused approach, the attributes used in reviews reflected the change.

Managers can use the findings of Lee and Bradlow to support marketing strategy decisions. By mining customer reviews, the company can see how its brand aligns with competing brands in consumers’ minds. Tracking how the attributes mentioned change over time can be valuable information in determining how successful campaigns have been. New segments can be found by clustering characteristics detected with semantic analysis. Spotting attributes associated with competitors’ products is valuable insight in how competition is performing.

The study showcases how big data can be used in marketing research and brings to light the great value customer review data has when finding the customers to involve in the value creation process. With the current popularity of social media analysis it would be fascinating to compare the effectiveness of analyzing reviews and social media postings.

Thomas Y. Lee, Eric T. Bradlow (2011) Automated Marketing Research Using Online Customer Reviews. Journal of Marketing Research: October 2011, Vol. 48, No. 5, pp. 881-894.

A closer look at

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

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

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

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

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

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

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

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

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

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