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Articles, Business Case

What’s your recommended size?

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Shopping online is more convenient, however it becomes tricky when shopping for clothes as we’re not able to try the clothes on. Hence, we purchase items in the size we think fits us best. This, unfortunately, may not always work in our favour. Often, we receive an item that doesn’t fit us well. We then either return it, store it at the back of our closets hoping one day it will fit, or give it to a friend. Essentially, a waste of time and money.

ASOS, a large online fashion retailer, just launched a new recommendation tool that helps solve this problem for their shoppers.

What is it?

The new tool provides customers with a personalized recommendation of a size it thinks will fit them best. It suggests a size based on customers’ past purchases and returns. Here’s how it works (Cherrington 2017):

  1. A recommended size instantly appears when the customer views an item.1
  2. Clicking the link shows the customer what the recommendation is based on.2
  3. Customers also have the option to provide input to improve recommendation accuracy by: (1) selecting which past purchases didn’t fit, (2) adding height, weight, age, and desired fit type (very tight to very loose), (3) selecting tummy shape, hip shape and bra size.

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If a customer is new, they can add in their height and weight and discover which size similar customers purchased and did not return.

ASOS has received a backlash for introducing this new tool. Some women have taken to Twitter to vent their frustrations that the tool is insulting and inaccurate. (Cherrington 2017)

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Others have responded more positively to the new tool, as customers no longer have to guess which size would fit and it saves the time and effort that would have been spent on returns and exchanges. It not only provides a personalized recommendation to customers, but it also includes the input of customers to produce better results, making customers feel like they are part of the creation process.

ASOS’ business model is to provide their customers with engaging content and experiences, great fashion at a great price and excellent service through an “effortless online and mobile shopping experience”. (ASOS 2017) More than just a fashion retailer, ASOS prides itself as a technology company – constantly innovating to improve service and customer experience. This new recommendation tool is a strong reflection of their business model and values.

Efficiency Criteria

The joint profitability criteria is met as this recommendation tool improves the joint value for both ASOS and its customers. While some customers are currently unhappy with this new tool, once ASOS improves the system to deliver more accurate recommendations, customers are likely to appreciate the tool more. It saves them from spending money on clothes that don’t fit and will increase customer satisfaction.

The investment cost of this new recommendation tool is low as the company only needs to improve the recommendation system based on feedback. The company also benefits from the increased customer satisfaction and sales from customers that previously abandoned their shopping cart due to size concerns.

The feasibility of the required allocations is also met. The polity and judiciary dimensions of the institutional environment do not relate directly, however the social norms dimension is met as ASOS has a strong reputable brand,  thus creating trust with customers.

References

ASOS 2017, ASOS Story, ASOS Plc, viewed 9 March 2017, <https://www.asosplc.com/asos-story&gt;.

Cherrington, R 2017, ‘ASOS Is Guessing What Size Its Customers Are, And They’re Not Happy About It’, The Huffington Post, 24 January, viewed 9 March 2017, <http://www.huffingtonpost.co.uk/entry/asos-size-recommendation_uk_58871c69e4b02085409924c3&gt;.

 

 

 

Articles

The Digitization of Word of Mouth: Promise and Challenges of Online Feedback Mechanisms

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Let your fingers do the talking

With the rise of the internet came a distinct and new opportunity – not only could organizations more easily reach their, but customers could express their thoughts directly to the world with online feedback mechanisms.

Word-of-mouth has become digitized into a large-scale internet-based feedback network, enabling individuals to share their reviews of companies, products, services, individual sellers and more. Not long ago, consumers would make their purchasing decisions based on advertisements or advice from experts. Now, however, the author suggest that evidence points to consumers are increasingly relying on the reviews of others online.

As a result of this, the author (Dellarocas 2003) suggest that management now need to understand how these online feedback mechanisms affect their organizational activities, including:

  • Brand building and customer acquisition
  • Product development and quality control
  • Supply chain quality assurance

This paper discusses the new possibilities and challenges these feedback mechanisms pose and identifies how these online feedback mechanisms differ from word-of-mouth networks. It also provides a perspective from game theory and economics, focusing on feedback systems in online marketplaces, and identifies opportunities this new area brings.


Online feedback vs. word-of-mouth networks

The author propose the following difference between online and traditional feedback systems, which includes:

  • The unprecedented scale and reach of online systems
  • The ability of their designers to precisely control and monitor their operation
  • New challenges, such as the unpredictability and unreliability of online identities and the almost complete, and lack of contextual cues of subjective information


Case Study: eBay

Following an analysis of the literature available on the eBay’s feedback mechanism, the author found that:

  • Feedback profiles affect both the prices and likelihood of sale
  • The effect of feedback on prices and likelihood sale is increased for more risky sale transactions and for items that cost more.
  • The components of eBay’s feedback mechanism that influence buyer behaviour most are the total number of positive and negative ratings, and the number of recently posted negative reviews.


Reputation in Game Theory & Economics

Based on a thorough analysis and application of game theory on reputation, the author put forward the results that are most relevant for online feedback mechanism designs.

The author suggest that incentives to maintain a reputation reduce over time and eventually completely diminish. The author attribute this to the “trade-off between current restraints and the promise of future gains”, in a limited number of repeated games.

Solutions proposed for this includes: (1) Establish community membership rules that produce good behaviour, and (2) assigning a value to reputation that can be bought and sold, such that ncourages the maintenance of good reputation.

What’s good about this paper?

In addition to conducting an extensive literature review on the topic, the author of this paper collected the most valuable results of previous work and propose solutions to problems detected. It was also interesting that the author used a different perspective, game theory & economics to evaluate reputation, as opposed to the usual marketing and branding perspectives.

A suggestion for future research to extend on this paper would be to expand the focus from solely online feedback in online marketplaces to more types of online feedback mechanisms.

 

Dellarocas, C 2003, ‘The Digitization of Word of Mouth: Promise and Challenges of Online Feedback Mechanisms’, Management Science, vol. 49, no. 10, pp. 1407 – 1424, viewed 4 March 2017, <http://www.jstor.org.eur.idm.oclc.org/stable/pdf/4134013.pdf&gt;.

Business Case

The Future of Beauty: Makeup Tailored For You.

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When it comes to finding the right shade of make up for your skin, I’m confident that I’m not alone in my frustration. Most, if not all, cosmetic brands offer a range of makeup in different shades, catering to both light and dark skins, with different moisture levels. However, this standard range of shades don’t cover all skin tones, which leaves the consumer constantly wondering if they’re leaving home with their face too light or too dark.

Lancôme, one of the pioneers among the cosmetic industry leaders that have shifted their focus to be more customer-centric, are now engaging in personalized products by co-creating with their consumers.

What is it?

The company recently introduced their new product – Le Tient Particulier. It’s a foundation in the shade custom-made for your skin. The consumers face is scanned with a small handheld gadget and the data is then presented to them on a screen with information about their skin. The consumer has the option to select the moisture level of the formula and it’s coverage intensity. The data is sent to a machine that dispenses the formula’s ingredients and blends it together. Within a few minutes, the personalized product is ready. The consumer can test it on their skin and tweak it to their liking. The final product is then saved to the consumers’ custom Complexion ID, which is printed on the bottle with their name, for easy refills. (Lancôme 2017a)

In this experience, the consumers needs are centred and the consumers become part of the value creation process . Lancôme is also able to build stronger relationships with their consumers. Their business model is to offer high quality products that are relevant for all consumers, in addition to meeting their goal of “continually taking science and creativity to new levels” (Lancôme 2017b).

Efficiency Criteria

The joint profitability criteria is met as the product maximizes the joint payoffs for both the consumers and the company. The consumers benefit from obtaining the product designed for their skin, which perfectly meets their needs, thus eliminating the need for them to continue experimenting with different products or settling for one that is less satisfactory. Furthermore, consumers will be able to enjoy the feeling of accomplishment that arise by modifying the product to their preferences (Franke, Schreier & Kaiser 2010).

Even though the company is faced with the investment cost of the machines per store location, the company benefits from the high switching costs consumers experience after purchasing this product. They will likely continue to purchase the product as they’ve found the ideal formula for their skin. In addition, the company further secures consumer loyalty by offering consumers the option to tweak the formula if the consumers become unhappy with it.

The feasibility of the required allocations is also met. While the polity and judiciary dimensions of the institutional environment are not directly related in this case, the social norms dimension is met. Lancôme is a reputable luxury skincare and cosmetics brand, which increases trust in its brand.

References

Franke, N, Schreier, M & Kaiser, U 2010, ‘The “I Designed It Myself” Effect in Mass Customization’, Management Science, vol. 56, no. 1, pp. 125 – 140, viewed 12 February 2017, <http://pubsonline.informs.org/doi/pdf/10.1287/mnsc.1090.1077&gt;.

Lancôme 2017a, Le Tient Particulier, Lancôme, viewed 16 February 2017, <http://www.lancome-usa.com/LTP-landing-page.html&gt;.

Lancôme 2017b, Discover Lancôme, Lancôme, viewed 16 Februrary 2017, <http://www.lancome-usa.com/discover-lancome&gt;.

 

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