Starting with the first paper (Cheema et al.), this paper was focused on consumers who participate in auctions. They researched which factors affect the behavior of consumers during auctions. Their conclusion was that there are indeed several factors which affect the consumer. These are divided in economic, social and psychological factors.
The second paper discusses the topic social commerce network. Social commerce is an emerging trend where sellers are connected in online social networks. Furthermore, in these networks, sellers are individuals instead of firms. The paper discusses the differences between social commerce and the regular bricks-and-mortars shops. An example would be that the traveling costs are lower when shopping online.
Another important factor in this paper was the fact that these networks can create economic value. By linking shops together, the customers can easily browse between shops. This improves the accessibility of the network’s shop. The more a shop is connected by other shops, the more it improves its accessibility. However, the sellers should aim to get as much links going to their shop instead of leaving their shop. In the end, the shops which benefit the most from social commerce are the ones whose accessibility is most enhanced by the network.
Continue reading Consumers as sellers
The relationship between profitability and loyalty seems to be much weaker than expected and also weaker than the proponents of customer loyalty programs claim(‘The Mismanagement of Customer Loyalty’ (2002). According to this paper of Reinartz, Werner and V. Kumar, there’s is no evidence to suggest that loyal customers necessarily are cheaper to serve, less price sensitive or are effective in bringing in new business. So, in light of their findings many companies have to reevaluate the way they manage customer loyalty programs. Companies have to find ways to measure the relationship between loyalty and profitability. Hereafter the company can place their customers into the Choosing a Loyalty Strategy Matrix, to apply strategies to the different segments.
Concluding the article, there is no one right way to make loyalty profitable! An example of a company that is tries to achieve loyal and profitable customers in a good way, we think, is Agradi(www.agradi.nl).
Continue reading Customer Loyalty & Virtual Communities
More and more companies go one step further than just delivering a service by staging experiences. In other words, “an experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event”. Moreover, an experience is, first, inherently personal existing only in the mind of an individual, secondly, no two people can have the same experience, and lastly, it is interacting between the staged event and the individual’s state of mind.
The Four Realms of an Experience
The video above bring us to the next point, which is the four realms of an experience. The First Crush Winery combines all four realms. They give their customers the opportunity to taste the wine (entertainment), to visit the winery (esthetic), to learn more about winery (educational), and to participate in the winemaking process (Escapist). First Crush uses all four realms of an experience bringing them at the sweet spot, which means the customer engage as well as in passive as in active participation, but also, absorption and immersion of information (theme) takes place.
Principles of Designing Memorable Experience
Part of the experience economy are the five principles of designing memorable experience. Since all customers perceive experience in a different way, designing an experience can be tricky. However, the following principle can give companies guidelines how to come close to a positive and memorable experience for their customers.
Continue reading Great Experiences
As we learned in session 6, the definition of a supply chain is: “A set of entities involved in design of new products, procuring raw materials, transforming them into products, and delivering them to the end customer.” So in fact it is the entire process of the design of a product, the manufacturing of a product and the delivery of the manufactured product to the customer.
The marketing value systems involve all activities that create and deliver value to the end customer. Some activities are internal to the firm, some are undertaken by others.
The traditional retail model consists of a few steps:
1. Standardized products are manufactured in a central place
2. After production the goods are shipped to warehouse or distribution center
3. The goods are distributed to retail shops
4. Consumers go to the shop and buy the product
5. Consumers store the product or use the product directly
In the E-business, the role of the consumer starts earlier. As we learned throughout this course, the customer can get active in the value creation process e.g. creation of his/her own product. Apart from that, the customer is able to order the products online. So, in fact, the E-business intervenes between the traditional flow of goods. In case companies expand their traditional retail model through selling their products on the internet, we call them brick and click. Website/webshops with no history as an existing company are called pure clicks. Benefits of such a system are immediate access, channel integration, personalized distribution and huge assortments. There can be differences in the distribution after the online order e.g. domino’s delivers the products from the near closest retailer whereas beren eetcafe delivers it from one central place.
To illustrate the importance of a demand driven supply chain, we found an example of a company which stresses why it is important to shift to such a new supply chain (“Procter & Gamble: Building a Smarter Supply Chain” 2002). Procter & Gamble realized that to remain profitable, consumer products manufacturers must find ways to optimize the performance of their supply chains. They realized they needed a consumer-driven supply network to stay ahead in the consumer packaged goods industry.
Continue reading Demand Driven Supply Chains
The music industry has clearly changed. The music industry has turned digital. That’s a fact. Traditional models do not apply anymore. Distribution rules shifted towards online channels. The main distribution of music comes in digital formats through digital environments. The industry is in need of new business models. A few years ago, Trent Reznor, the mind behind the band Nine Inch Nails, decided to change the rules. He left the big record companies, and decided to distribute the band’s albums through their website, for free! However, he managed to create strong bonds with the fans and offered exclusive offers to make the traditional formats of the album more attractive.
Another example discussed in class relates to the pricing methods followed. Radiohead, an English rock band from UK, decided to work interdependently and self-released their seventh album, In Rainbows (2007), as a digital download for which customers could set their own price. The Radiohead experiment set new standards for the industry.
Successful or not in terms of profits, these approaches showed that the future of music business is based on different dynamics between b(r)ands and consumers. All aspects of the value system have changed and new models need to be implemented.
Inspired from the Tesco case we discussed last week in class, I would like to share two videos related to Tesco and the technologies that the company pursues. One of the distinguishing approaches that made Tesco quite successful was the introduction of Online Grocery Home Shopping. The idea is pretty obvious and straightforward, they reallocate some of consumers’ effort needed (to come to the store and carry the shopping back home) to their processes (hand pick the items you want and deliver them at home). Actually, it may be strange to a lot to use such a system, but although in theory the company loses the retail impulsive behavior of some consumers, they have a very interesting channel to apply all their services, their offers, personalized to the fullest. See how it works:
In addition, we also talked about the recent developments in Tesco: Mobile Apps. Whether that is in a metro station while waiting (see an example here), or just by scanning a barcode of every item you hold, in any place, at any time:
However, when talking about these new technologies, we also have to take into consideration, who the target group is, and what may the reactions be (see for example the response of the person in 1:25). Interesting to see whether this will indeed be teh fitire of shopping!!
Giving the stage to your consumers to raise their voices can be beneficial for everyone. Everyone seems happy within such a system. Companies get a lot of insight about their preferences and needs (in a rather cheap way), you get bonded to them, you get them committed. Consumers are willing to participate because they feel they belong to a community of look-a-likes and they love the freedom to raise their thoughts, feelings, concerns. Well, let me stick to that last word…concerns!
Yesterday I read in the news the failure of McDonald’s Twitter strategy. They wanted to create an interface where consumers would share their positive experiences regarding the McDonald’s restaurants. Therefore they created the account @McDStories (currently deleted). However, they neglected the fact that word-of-mouth can be also negative. Given the past reputation of the restaurant chain, I doubt that giving the freedom to all consumers to speak up was the rightest choice! It started as a few tweets from the brand (“Meet some of the hard-working people dedicated to providing McDs with quality food every day #McDStories”). But soon it ended full of tweets such as :
Result: Not only the bad publicity and the need to switch down the account, but also consumers bonded even more against McDonald’s and made the story viral. Not only they failed to create brand value from their customers but rather they lost control of the negative brand associations promoted by their “customers” (if we can call them customers).
Empowering your consumers is a good strategy. A very good and promising strategy. But it is not a panacea. It is not a strategy to put all your other worries aside. It needs control, it requires that companies set the boundaries of the communities within which the brand stories would prevail.
Lesson learned? Time will tell…
In an interesting article Connecting to a sustainable future (written by Ernie Hood, 2003) I read that mass customization could be a key driver of sustainability. Mass customization could generate environmental benefits through the different parts in the process such as production, stocks, transportation and reduced use of materials.
The use of recycled materials in the production makes the product not only environment friendly but could also create a unique product for a specific type of customer. I found a nice example on www.freitag.ch, the company FREITAG mass customizes all kinds of bags produced of used truck sail. The production of the bags is also environment friendly by saving water and energy.
FREITAG is a nice and inspiring example of sustainable development by mass customization.
To buy new products, a lot of consumers do not go to the shop anymore but buy products on the internet. To sell more products, companies offer different approaches on recommendation techniques, because in general, product recommendation leads to more sales.
The first approach is Rule based non compensatory, which can be based on Elimination by aspects (EBA)and lexicographic. Rules based non compensatory on Elimination by aspects is showed through the red lines in the picture of bol.com.
Consumers first make a choice between different products and then make a choice in the product category. In this example consumers first choose books (instead of DVD’s, toys, games etc.) and then which languages, like English, Spanish or French. Rule based non compensatory on lexicographic is showed through the red lines in the other picture. It is the same as elimination by aspects but in this case people can fill in what they think is most important. So if they think a low price is important they get camera’s with low prices.
Drawbacks for non-compensatory technique are that it makes it complex for more options, because consumers has eliminated a lot things to come where the want to be. It’s easy to imitate for other companies and it passively provides information, which mean that inexperienced consumers don’t know what to with it. As example the pixels from the camera, what are 6.5 pixels?
Continue reading Product Recommendations: bol.com & Bridge cameras
Brand Equity – Brand equity stands for: the added value that a brand gives to a product. In the perspective of a firm toward the consumer, it’s also called consumer-based brand equity
1) Cognitive psychological view of brand equity:
- Brand association
- Brand awareness
- Perceived value
- Brand loyalty
2) Informational economic perspective
- – Assets based on asymmetrical informational structure of the market
- – Credibility: value signaling toward consumer
Product quality – there are three main ways companies can ensure their reputation and investments for high quality
- NOT cheating: If companies cheat with information about high and low quality, they will lose return on their brand investments and the total reputation of the company.
- Marketing mix elements as signals: most companies uses advertisements and packages to provide quality signals toward the consumers who doesn’t know enough information about a product
- Umbrella branding: same name used for many products as a signal that new launched products have the same quality as other products of the brand.
Brand as signal – A brand becomes a signal when the marketing strategies of firms in the past and present are symbolizing the firm. An importance of a signal is also characterized by credibility and clarity.
Clear brand signal : Decrease information costs
Decrease perceived risk by the consumer
Increase the consumer utility
Brand community – A community formed on the basis of attachment to a product or marquee. Recent developments in marketing and in research in consumer behavior result in stressing the connection between brand, individual identity and culture.
- Consciousness of Kind – the existence of a common enemy against whom to unite makes this brand community particularly strong.
- Rituals and Traditions – sharing brand stories and celebrating the history of the brand
- Moral Responsibility – include looking out for and helping other members in their consumption of the brand as well as retaining old members and integrate new ones
Two examples of a good and bad brand community: Continue reading Brands Signals and Brand Communities
JuJups is a co-creation platform that enables designers and non-designers to enjoy design and create things that they like. In JuJups they allow their customers to create their own designs by mish mashing. Some basic designs can be mish mashed by customers according to their wish. The firm delegates the creation of the products to customers. Or as they put it:
“JuJups lets you create your own designs – they make it easy and fun. You don’t have to be a designer to create what you want. You can now enjoy creating and sharing your own designs based on stuff created by designers.”
Because customers have different needs and wants and these needs and wants can change over time. This information is sticky. In the case of the customers of jujups it’s very difficult to get insight what the customer really want without delegating the idea creation to them. Jujups saves on costly consumers surveys and customers get the things they really want. By trial and error customers discover what they really want and even get more insight. They invest money and effort and in reward they get products they really want at the moment. They even can go beyond that. Jujups gives their customers a platform where they can display and sell their creations and get a percentage of the units sold. The firm profits by saving money on high cost customer surveys. They do have more costs because of the flexible production.
But how can a company involve their customers in the product development process if the products that company produces can’t particular be customized? This is the case for Proctor & Gamble (P&G). P&G has been credited for having the first written plan for Quality Function Deployment (QFD) process already in the sixties. Which they called: “ 12 steps to test market” process. QFD is a method to transform user demands into design quality, to deploy the functions forming quality, and to deploy methods for achieving the design quality into subsystems and component parts, and ultimately to specific elements of the manufacturing process. Through test market tests P&G got insights on what consumers wanted. Lately there has been a global movement towards customization. P&G however produces and sells products that have some restrictions with respect to customization. That’s why P&G came with their version of open innovation. They provide a platform for everybody that comes with a solution for the problems they encounter. They invite individuals, companies, independent entrepreneurs, the Government, laboratories, research institutes, financial institutions etc. On the P&G’s individual brands websites there is a reference to http://www.pgconnectdevelop.com/ . On this websites people can explore and get involved with open innovation process.
Khalid, Rihan, and Alexandra (team 6)
Another synonym word of open innovation widely used (especially) in the business literature is Crowdsourcing…”the act of sourcing tasks traditionally performed by specific individuals to a group of people or community (crowd) through an open call” (see Wikipedia).
An interesting industry which lately uses the voices of the crowd, an industry which empowers consumers into creating value and also into supporting the brand values is tourism. Traditionally, tourism industry operated on a one to many communication scheme where ministries of tourism held responsible for the promotion and the branding of tourist destination abroad.
India was one of the first countries that officially invited everyone in order to promote and create brand value. And by everyone, I mean everyone!! Locals, tourists, professionals, amateurs, young, old, educated, uneducated…Everyone. How? By using open discussion interfaces online, by asking and interviewing people in the streets. By introducing initiatives that engage people to India. India as a country, as a destination, as a cultural heritage (http://www.indiafutureofchange.com/). By organizing contests, they gave incentives to the people to participate in this discussion.
Back in Europe, Cyprus recently initiated a branding project in order to revitalize the brand value of Limassol. How they do it? By combining private initiative and public support. By engaging everyone in discussion. By extensively using social media and interacting with locals and tourists. Based on the joint input, they created a new city logo, and a new branding campaign!!
Lastly, Sweden offered the control of the official Twitter account to the people of Sweden. Sweden in that way, has created the world’s most democratic account. The direct results: In one month, the number of followers increased drastically and word of mouth made that story viral. Not bad to start with. Time will tell whether this utter freedom can have beneficial long term effects or will just end in….loss of control of the content and abuse!!
Do you know other examples? Local or global? Would love it if you shared!!
Lands’ End which was acquired by Sears in 2002, enlarging his shop at Sears in 2007. Lands’ End adds in-store monogramming and more small stores that provide access to the site of Lands’ End. Even customers can return merchandise that has already passed more than 20 years. Customers of Lands’ End can use its website to order jeans, pants, chinos and shirts that are tailored to their specifications. Customer fills in his/her specifications to a form at the website, which then will be sent through a computer network to develop an appropriate size for such customers. Individual patterns are then sent electronically to the factory, then the patterns will be used to trigger the cutting equipment materials. There are almost no extra production costs because the process does not require additional storage, which is too much production, inventory and costs to the customer is only slightly higher than the garment which is mass produced. At Lands’ End Live, anyone who shop online at landsend.com can send PS to customer service staff. If you have questions about a particular garment, customers can ask directly. Lands ‘End reported that the additional customer service of this kind adds 6 percent to their sales when a customer uses Lands’ End Live.
Continue reading Mass Customization: Lands’ End case
Mass Customization definition: a flexible production system to deliver a product to order that matches the needs of an individual customer or user (Randall, Terweisch and Ulrich, 2003)
Five different principles of user design:
1) Customize the customization process;
- Types of interface: 1) Parameter based 2) Needs based
- e.g: Dell website’s different user interfaces
2) Provide starting points;
- Consumers differ greatly in the extent to which they wish to affect the design of a product.
- Different starting points: 1) Free form design 2) Combinatoric configuration 3) Starting points
- e.g: Customatix, Adidas miCoach, NikeID
Continue reading Group 7: Mass Customization Mini Case
There are several sites on the net that use personalized recommendations, for our mini case we discussed several sites, which included Kieskeurig.nl and Corendon.nl
Kieskeurig.nl is a comparison sites that compares all kind of products that are available on the net or in real stores. It is an independent website, which means that companies can not buy a place in the ranking so that there are no companies pops up first due to a massive share they have in the website.
Customers of Kieskeurig.nl can write their own reviews about each product and give a rating to the stores and products. When buying a product, customers can choose which product they are looking for, and then decide which attributes are of importance for them. Also the reviews and rating that have been giving to customers on the site, are always double reviewd by specialists from Kieskeurig.nl. In that way Kieskeurig.nl wants to be sure that are no pointless reviews on their site.
Continue reading Personalized recommendations; Kieskeurig.nl & Corendon.nl
Now that we have accomplished our presentation (on Monday’s 16th lecture)…it is time to share with you our worthwhile experience to get there!
To begin with, we would like to share with you the most important points that we gained from studying the relevant articles and searching through different sources!
Mass customization refers to a customer co-design process of products and services which meet the needs of each individual customer with regard to certain product features.
Based on the problems that can occur when applying mass customization and the principles that should be followed in order to avoid them, we found two real-life examples of mass customization from two specific companies from different industries. We chose these totally different examples to show that mass customization can be implemented everywhere. Both Mini Cooper and m&m’s apply mass customization giving customers the opportunity to design the overall product based on their individual needs and preferences.
Continue reading Mass Customization…
Branding is more than just a business buzzword. It has become the crux of selling in the new economy. If the old marketing mantra was,” Nothing happens until somebody sells something,” the new philosophy could be” Nothing happens until somebody brands something.”
A brand represents many intangible aspects of a product or service: a collection of feelings and perceptions about quality, image, lifestyle and status.
The diagram below illustrates the factors that are crucial in building successful brands.
We are going to give further details for the most of the above factors, somehow indirectly, analyzing brand communities and brand signals.
Continue reading Building Brands..
We are heading to the 5th session of the Consumer Channel Dynamics seminar and I think that we all have a clear idea of mass customization. During lectures, presentations and after having read so many articles.. we have come across many examples of companies applying mass customization!
I noticed the web-site of “Interflora”, a flower delivery network-company that gives customers the opportunity to design their own floral gift. The whole process is comprised of 5 steps;
1. The customer has to select the recipient of the gift and the occasion for sending it,
2. Select the style of the floral gift,
3. The flowers’ color,
4. The amount of money he is willing to pay,
5. The recipient’s details (address, phone number etc.).
I believe that the specific example is different from what we have explored so far.
I hope you will enjoy it!
In the world where we live everything must be faster, better and newer. Companies have to innovate and develop products/services faster then ever. With this challenge companies need to think different.
Open innovation is a new way of integrating customers during the research and design period of the firm. This picture below is a simple example of how open innovation works. Because of the new method, firms can choice between the traditional approaches or the new open approaches. The differences between these methods are showed in the table below.
Continue reading Open innovation
I found a very interesting video in which Matthew Guiste, director of global social media at Starbucks talking about open innovation and social media. Specifically he is talking about MyStarbucksIdea.com generating around 100.000 ideas for new products and business improvements. It is good to see this video because it describes most of the things that we learn in class, actually how all these things are applied in a real company.
So, enjoy My Starbucks Idea case…