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

A potential for consumer value creation: Citymapper


Introduction
Founded in 2012 by Azmat Yusuf (Tanasoiu 2018), Citymapper is a UK-based company which aims to transform the transportation industry. Through its application, Citymapper helps its user navigate a given city’s transportation grid and provides users with the ability to search for the desired destination, after which the app displays a number of travel itinerary alternatives. Since its inception in 2012, Citymapper has grown internationally and currently operates in 39 cities around the globe (Citymapper 2018). The company creates value for its user by providing them with a travel companion that generates personalised travel options.

But can the consumers become of more value for Citymapper by creating value other than Citymapper capturing their value through the search engine?

Current business model
Citymapper’s currently offers value in the form of efficiency and usability to the users of its transit application. The company exploits its current IT infrastructure, collected data and easy to use user interface to deliver digital content to consumers. On the digital business model framework (Weill et. al 2013) Citymapper’s business design and knowledge of the end customer most closely correlate with the supplier business model.

One way information stream

Citymapper currently gathers partial knowledge of the end users such as search and location (start and end point) data (Citymapper 2018). Other data such as name, address, demographics or search history are not being collected. Therefore, the main information stream flows through the Citymapper application to the user.

Potential consumer value creation
Citymapper can capture a great deal of value by giving its users the ability to co-create value for the application. This can be done by allowing users to give inputs, that are in turn shared with the rest of the Citymapper users. In the current situation, Citymapper supplies users with information about public transport and allows users to plan their public transport trips. The urban transport information shared by Citymapper is limited to the information that is supplied by large public transport companies or private companies gathering transport data. Citymapper has the option to turn their business model from a supplier model into a two stream model.

Two stream business model

How can consumers co-create value for Citymapper?
By starting to use one of their greatest assets they have, a large user-base. Citymapper has the possibility to crowdsource the rating system and the supply of information to their customers making it possible to better understand and support their own customers. Not only are they able to deliver more precise and real-time data on transportation and planning, but also they get more insights in the demands and needs of their own customers. A few of many options that can be crowdsourced are listed below.

The crowdedness of the vehicle
Users could indicate the crowdedness of a particular vehicle signaling that there are no seats available, encouraging users to opt for a different train. Other users could be notified while they are still at home about the crowdedness of the trip, and come prepared, saving them from the surprise of a crowded train, which is one of the greatest pain point related to public transport, according to Fellesson and Friman (2008).

Unexpected delays during the trip
Users could indicate unexpected events that would delay the trips. This live information can be sent to other users, notifying them that the vehicle will be running late, and suggesting an alternative trip. This is all done much quicker than first having to signal the transit company, which in turn must notify users through the rail stations.

Supplier reliability & comfortability
Users could rate transportation providers on their service, both looking at reliability and comfortability. By rating cleanliness, politeness of the driver and price/quality consumers get insights in the overal quality of the transportation modes. This would help other users to select their company of choice.

By gaining more knowledge on what the users, both as a whole and individually, like and demand recommendations can be given. For example, someone who never uses the bus does not want to have the bus in their itinerary. By receiving ratings of services, crowdedness and delays better recommendations can be made. Even more interesting, customers create recommendations and insights for other users, creating a C2C environment.

In order to improve the customer experience for Citymapper users, an in-app payment system could be introduced as well as a ticket management feature. These additions to Citymapper’s value proposition effectively introduce two additional steps in a typical user journey: Once a given user has gathered the desired information regarding his public transport itinerary, instead of leaving the Citymapper ecosystem, the user is given the option to directly purchase the tickets corresponding to the selected journey. Furthermore, once the ticket purchase is completed, tickets are stored within the ticket management feature of the new Citymapper app. This enables the user to remain within the company’s ecosystem throughout the physical public transport journey, using the app as a digital ticket. Overall, the addition of in-app ticket purchase coupled with the ability to use the app itself as a digital ticket greatly improves the overall customer experience while increasing the time a given user spends within the Citymapper platform.

Additional options
Multiple other options open up when turning Citymapper into an open platform environment. By adopting one of many other open platforms for ride sharing and including them into the transportation itinerary would really turn on consumer value creation. Imagine the option to join someone in the car, scooter or motorcycle for a part of your trip. Think of what would happen when Citymapper includes Blablacar, Snapcar, Felyx, Lime, Mobike, Car2go and many others in their system. The options to travel from A to B would become endless.

References:

Citymapper (2018) Making Cities Usable. Citymapper.com. Available at: https://citymapper.com/company?lang=en  

Crunchbase, 2018. Available at: https://www.crunchbase.com/organization/citymapper-limited#section-investors

Weill, P. and Woerner, S. (2013). Optimizing your digital business model. MIT Sloan Management Review, 54(3), pp.71-78.

Fellesson, M. and Friman, M. (2008). Perceived Satisfaction with Public Transport Service in Nine European Cities. Journal of the Transportation Research Forum, 47(3), pp.93-103

Pinduoduo – “Chinese Groupon”: the fastest growing challenger in China’s e-commerce market


Context

The Chinese e-commerce market is dominated by large players such as Alibaba and JD.com who hold nearly 75% of the total market share. Newer players often struggle to enter the market due to intense competition, but a new player called Pinduoduo has managed to claim the third spot in the e-commerce market and is the fastest growing e-commerce app in China (see figure 1 and 2). In a short period of time, Pinduoduo acquired a market share of roughly 5% (Financial Times, 2018) and achieved 100 billion RMB annual merchandise sold in two years after launch (Graziani, 2018). Data from December 2017 indicate that 50% of all users that uninstalled Taobao (owned by Alibaba) moved to Pinduoduo (Dailypanda, 2018), marking Pinduoduo is a potential threat if left unchecked.

Figure 1. Average Monthly Active Users (MAU) from March 2017 until June 2018. Retrieved from: Financial Times (2018).
Figure 2. Largest Chinese e-commerce App by Monthly Active Users (MAU) in January 2018. Retrieved from: Graziani, T. (2018)

Introduction – Pinduoduo and its business model

Pinduoduo was found in September 2015 in Shanghai by former Google engineer Zheng Huang and is a third-party social commerce platform that focusses on connecting manufacturers, suppliers and retailers with end-consumers in the B2C market. The platform earns revenue from collecting commission fees and online marketing services including advertising. Pinduoduo’s platform distinguishes itself from its competitors by providing users the option to conduct “team purchases”. The concept of team purchase is similar to Groupon’s “group buy” (see blogpost of Hsuchiachenjenny (2014) for a brief introduction). Users can invite friends through other social media platforms to create a “shopping team” and order discounted items together in bulk (see figure 3 and 4). Team purchases allow consumers to receive discounts as much as 90% off on products ranging from T-shirts to smartphones. The platform sold more than 4.8 million umbrellas at 10.3 RMB (1.51 USD) per piece and 6.4 million units of tissue paper at 1.29 RMB (0.19 USD) per box (Lee, 2018). Users mainly benefit from Pinduoduo due to getting products at a lower price, while suppliers are enabled to benefit from reducing inventories and generating revenue from aggregation of demand.

Figure 3. Steps to conduct team purchasing at Pinduoduo’s platform. Retrieved from: Fung Business Intelligence (2018)

Figure 4. Pinduoduo’s interface. Source: Fung Business Intelligence (2018)

Pinduoduo’s unique value: user engagement – more than just financial stimuli!

Pinduoduo uses financial stimuli to encourage consumers to help them expand the user base. For instance, convincing one person to install the app and sign in with WeChat will be rewarded with a box of candy and convincing nine people will grant you 1.3 kg of nuts (Graziani, 2018). While financial incentives motivate people to act, academic research (Burtch, Hong, Bapna & Griskevicius, 2018) argue that including social norms are more effective at motivating intensive effort. The social norms refer to “the prevalence of a behavior in a relevant population, such as the number of individuals who already have written reviews” (Burtch, Hong, Bapna & Griskevicius, 2018). Their study pointed out that financial incentives encourage people to write product reviews, while social norms are better to stimulate people to write longer reviews. A combination of financial benefits and social norms are posed to be the best driver of quantity and quality of writing reviews.

Drawing the link with Pinduoduo, we see that the company incorporates the concept of social norms in its business model. Pinduoduo’s application is gamified and includes a public leaderboard that ranks people based on the money they have made out of inviting friends and displays the number of friends they invited. This aspect allows its users to compare themselves with other people and creates a social motivating factor that goes beyond a mere financial stimulus. The appeal of Pinduoduo lies not merely in its low prices but comes from the satisfaction and the pleasure one receives from getting a good deal (Pandadaily, 2018). Therefore, the inclusion of a social motivating factor alleviates its dependence on the constant input of money to incentivize its users. Instigating users to act as brand ambassadors motivated by both financial and more importantly social benefits is a major success factor that allowed Pinduoduo to establish a large user base in a short period of time.

Are Pinduoduo and Groupon the same?

At the time Groupon emerged in 2008, social media and mobile was less entangled with people’s daily lives than in the current situation. Desktop usage, email newsletters, and credit card payments posed limitations on Groupon’s social commerce potential. In 2013, Groupon has dropped its group buy feature and has lost its status as a social commerce platform. The main difference with Groupon’s business model is that Pinduoduo’s business model leverages the social ecosystem in a more effective way. Tencent has been a principal shareholder of Pinduoduo since February 2017 and facilitated the integration of Pinduoduo’s platform with its own social media. Integration with WeChat (an all-inclusive social media app sharing characteristic of Facebook, Twitter and Whatsapp with Paypal functionality) allows fast and real-time communication between users and enables users to make payments with little effort. At this point of time, it is evident that Pinduoduo has surpassed Groupon’s ability to leverage the social ecosystem to establish the consumer base that it has now.

Figure 5. Difference between Pinduoduo and Groupon in user engagement.

The challenges ahead

Viewing Pinduoduo’s success in motivating users to spread the word and persuade their friends in using the app, the company however reported an annual loss of 525 million RMB (77.5 million USD) in 2017 (Fung Business Intelligence, 2018). The current strategy is focused on a push strategy and faces high costs in building brand awareness of the platform. The platform is however plagued with fake products similar to its rival Taobao and JD.com (Lee, 2018). Other questions concern to what extend product suppliers are willing to tap into the platform, as the platform highly focuses on price and pays little attention to brand awareness of its suppliers (Fung Business Intelligence, 2018).

Summary

Pinduoduo raises the traditional e-commerce platform to the next level by incorporating social media. Users may benefit from getting lower prices for products, but in return need to find friends to join them. The platform also encompasses social norms (e.g. public ranking system) for users to expose themselves and improve community building, while simultaneously gamifying the concept and adding a fun aspect. While the ability of its business model is rather successful, there are challenges that it needs to overcome to guarantee the sustainability of its business model. This is however a topic for another discussion.

Sources

Burtch, G., Ghose, A. and Wattal, S. (2013). An empirical examination of the antecedents and consequences of contribution patterns in crowd-funded markets. Information Systems Research, 24(3), pp.499-519.

Financial Times (2018). Ex-Google engineer set for big payday after Pinduoduo IPO. Retrieved from https://www.ft.com/content/05408022-8a2b-11e8-b18d-0181731a0340

Fung Business Intelligence (2018) Group-buying platform – Pinduoduo. Retrieved from https://www.fbicgroup.com/sites/default/files/CNE_Pinduoduo.pdf

Graziani, T. (2018) Pinduoduo: a Close Look at the Fastest Growing E-commerce App in China. Retrieved from https://walkthechat.com/pinduoduo-close-look-fastest-growing-app-china/

Hsuchiachenjenny (2014) Business case Groupon. Retrieved from https://consumervaluecreation.com/2014/05/18/groupon/

Lee, E. (2018) https://techcrunch.com/2018/07/26/the-incredible-rise-of-pinduoduo/

Pandadaily (2018) Alibaba’s Worst Nightmare: Pinduoduo Becoming the No.1 E-commerce App in China. Retrieved from https://pandaily.com/alibabas-worst-nightmare-pinduoduo-becoming-the-no-1-e-commerce-app-in-china/

Nice shirt you created! How about this?


This is a review of the study “Social Product-Customization Systems: Peer Input, Conformity, and Consumers’ Evaluation of Customized Products” by Tobias Schlager, Christian Hildebrand, Gerald Häubl, Nikolaus Franke and Andreas Herrmann (2018)

Suppose you are in desperate need of a new wardrobe, but the predetermined shops with stock shirts, pants and other offerings are too stale for you. In other words, you feel like getting creative and coming up with your own design. You might be a good designer, you might not be. It does not necessarily matter when endeavoring custom clothing websites in which you get to decide what your new clothing should look like. The reason for this is the recent invention of social customization systems, which the aforementioned article discusses in depth. Social customization systems aim to offer constructive feedback on a customer’s submitted design, providing opportunities to improve the design by suggested changes or complimenting the custom piece of clothing.

This form of value cocreation can be executed in two distinct ways, publicly or privately. In public customization systems, the feedback is displayed in an accessible environment, for example on the website of the custom clothes shop. In a private setting, however, the criticism or tips are provided in a personal setting that is not accessible to others. An example of this would be through e-mail. Social customization systems are becoming more implemented in products that are often demanded to have certain customization options. Some examples are cars, computers and clothes. This study dives deeper into differences between private and public customization systems and the response on the feedback provided.

Study

The goal of the researchers was to find information on the hypothetical relations in social customization systems between thinking styles, public and private nature of the system, conformity to peer input, perceived closeness to input providers and the evaluation of the final product. That’s a lot of vague information to take in, so to fully understand what is meant by the mentioned variables, we’ll move on to the hypotheses.

The first hypothesis the authors address is about thinking styles, public vs private recommendations and conforming to product modifications. Thinking styles, according to researchers, can be separated by the terms holistic and analytic. Holistic thinking entails taking into account the whole of a situation when addressing a problem, whereas analytic thinking tends to split up the problem in components, analyzing them one by one. The researchers hypothesize that people with a more holistic (analytic) thinking style tend to conform to product modifications more when the recommendations are provided in a public (private) setting.

Besides this hypothesis, the authors look deeper into the evaluation of the final product as a result of perceived closeness to input providers and the extent to which the consumer has conformed to peer input. The hypothesis reads that people who conformed to suggested modifications in a greater extent, are more likely to evaluate their final product more favorably when the perceived closeness to the input provider is high. Simply put, the authors wanted to find out if you, after implementing suggested modifications, evaluate the final product configuration more positively when you feel close to the person who provided the feedback and whether you evaluate it more negatively if you feel distant to the provider.

Conceptual model

Results

The researchers did five different studies in order to find support for their hypotheses. While not all five studies were aimed at both hypotheses individually, they did in most cases contribute towards support. Consequentially, the authors managed to find significant support for both hypotheses, which means that holistic thinking people are more likely to conform to public recommendations, whereas analytic people prefer private communication. Secondly, they found that closeness to the input provider does implicate that you are more likely to evaluate the final product favorably.

Theoretical implications

The findings of this study offer three new insights in existing literature with regards to social customization systems and consumers’ final product configurations. Firstly, it is now empirically supported that when a consumer receives public input on a design or setup, this person is more likely to conform to this input when the thinking style is holistic, while the opposite goes for private input and analytical thinking styles. Secondly, the finding that perceived closeness to the input provider matters when evaluating the final product modifications contributes to literature. Lastly, this research shows that the main predictions of social impact theory  are relevant across systems in passive systems rather than systems in which active participation and contribution is the standard (Latané, 1981).

In short, this study enhances insights on two important moderators (closeness to input providers and thinking style) as well as expanding the understanding of the social influence in social customization systems.

Managerial implications

Practically speaking, these results are highly relevant in managerial decisions. Given the findings with respect to thinking styles and conforming to customization, decision-makers should take into account what the more prominently present thinking style is in a certain market or country when deciding on the nature of recommendations. For example, it was mentioned in the study that German people, on average, are more analytic thinking people while Japanese people tend to be of a more holistic thinking nature (Monga and Roedder John, 2007; de Bellis et al., 2015).

Besides that, the conclusion that feeling close to a person when taking into consideration their suggested modifications, allows for managers to think about how they wish to design their social recommendation system. Given that it is difficult to determine the personality of a person just through their browsing behavior on the website, it could possibly be a wise move to further implement abilities to share your customized product with friends, whom you are often times feeling close to.

Strenghts

One of the most solid decisions made by the authors of the research was the opting for five different studies to find proof for their hypotheses. While a single study often times suffices in providing support for a hypothesis, the authors decided that, in order to eliminate most doubt or ambiguities in the research, five individual studies would improve the reliability of the research. This has definitely helped the credibility of the paper.

Another strong aspect of the study was that researches 2, 3 and 4 were all conducted in a natural environment rather than a fabricated one. The participants of those studies were asked to browse a website in which custom men’s dress shirts could be designed on an actual online social customization system. By providing the natural element to the studies, the chances of generalizability of the research increase.

Weaknesses

While the findings of the study are highly relevant and some good overall decisions were made in the design of the study, some weaknesses are present as well. Particularly the decision to attribute a whole country to a particular thinking style is considered to be a non-desirable move. The first of the five studies that were performed in this research categorized Japanese people in general as holistic thinking people while German people were all attributed with the analytic thinking style. You might have tested this for yourself and are likely to have found conflicting results. This means that the generalizability of the study is at stake. This is not the only weakness found that impacts the generalizability. Other than the thinking styles being attributed with entire countries, the studies were often times focused almost solely on male or female participants rather than having a gender neutral product with an even distribution of gender. This makes it difficult to conclude whether the results hold across genders.

References

de Bellis, E. et al. (2015) ‘Cross-national differences in uncertainty avoidance predict the effectiveness of mass customization across East Asia: a large-scale field investigation’, Marketing Letters. doi: 10.1007/s11002-015-9356-z.

Latané, B. (1981) ‘The psychology of social impact.’, American Psychologist, 36(4), pp. 343–356. doi: 10.1037/0003-066X.36.4.343.

Monga, A. B. and Roedder John, D. (2007) ‘Cultural Differences in Brand Extension Evaluation: The Influence of Analytic versus Holistic Thinking’, Journal of Consumer Research. doi: 10.1086/510227.

Contest holders, stop staring yourself blind!


Submission behavior and its implications for success in unblind innovation contests

Today more than ever, innovation and a constant search for novel solutions with economic value, is vital to strengthen competitiveness of firms (Bockstedt, Druehl, & Mishra, 2015). In the recent years, there has been an emergence of cost-effective “innovation contests”. Innovation contests are a way to invite individuals to submit their ideas or solutions to a specified problem. These contests are used to leverage the creativity, skills and intelligence of thousands of individuals on the internet (Füller, Hutter, Hautz, & Matzler, 2014). Innovation contests can either be ‘blind’ or ‘unblind’. In blind contests, the visibility of the submission posted is limited only to the individual who submitted it and the contest holder (Wooten & Ulrich, 2015). Wooten and Ulrich (2015) define unblind contests as contests where others’ submissions are fully visible to participants while the contest is still live. Seeing others’ submissions including the feedback from the contest holder, could have an influence on the submission behavior of a participant. Figure 1 shows the difference between blind and unblind contests on Logomyway.com, a popular innovation contest website which matches graphic designers with organizations in need of a new logo. As unblind contests are quite new and not that well-explored in the literature, Bockstedt, Druehl and Mishra (2016) analyze the effect of unblind contests by examining the implications of participants’ submission behavior for contest outcomes.

Figure 1a. Unblind contest on Logomyway.com

Figure 1b. Adapted version of blind contest on Logomyway.com

Theoretical background
Logomyway.com is a consumer co-production network (Dellaert, 2018) in which the consumer co-production is high and the unit of co-production is the network, as the contest holders have the main benefit of this platform (Dellaert, 2018). In that way, value creation takes place in the interaction between customers and the platform (Gronroos & Voima, 2013). A logo is a useful product to crowdsource as it contains a clear question, is easy to implement, there are no obvious skills needed to create a logo and there is no established best-practice (Tsekouras, 2019).
Logomyway.com creates benefits on social needs of the contestants, as their ideas are seen, they can be part of a community. Through receiving positive feedback, or even winning a contest, their social needs are met, leading to higher self-esteem. Moreover, contestants can have a monetary motivation and it is also fun and instructive to create logos. The four main reasons for organizations to use crowdsourcing are to solve problems, generate ideas, outsource tasks or pooling information (Tsekouras, 2019). Logomyway.com especially focuses on idea generation and outsourcing the task of designing a logo. In this way, the contest holders gain benefits by lowering branding-costs (Tsekouras, 2019), gathering insights in the product perception of the consumer and having the choice in picking from a broad range of possible logos / solutions.

Methodology & Findings

In order to take a closer look at how contestants solve problems in unblind innovation contests, a case study was conducted. By using a HTML scraping tool, researchers collected data from 1024 logo-design contests hosted on Logomyway.com. In addition to contest data, profile information and historical performance of contestants was gathered. As contestants were not aware of this data collection, their submission behavior was not biased.  Results of this study show how submission behaviour could impact contestant’s success in unblind innovation contests. First of all, a lower position of first submission is associated with a greater likelihood of success due to greater potential for obtaining intermediate evaluations from contest holders, shaping the contest holder’s taste and participating actively in the contest.

Secondly, the number of submissions have a positive impact on the likelihood of success up to a certain point. Beyond this point, marginal knowledge gained about the problem specification and the contest holder’s taste diminishes as more submissions are handed in (Figure 2). Therefore, contestants should focus their efforts on high quality submissions as a quantity-quality trade-off was indicated.

Figure 2. Graph on the likelihood of success x number of submissions

Furthermore, contestants who participated in a contest for a longer period were more likely to succeed as it allows them, via emerging information structure, to observe and assess their submissions with respect to the competition and update their understanding of contest holder’s requirements (Figure 3).

Figure 3. Submission participation time frame

Strengths

A main strength of this study is that it examines unblind submissions in an innovation contest, whereas previous studies mainly focused on examining blind contests (Bockstedt et al., 2016). As unblind contests are on the rise due to their feedback and co-learning system, knowledge about their way of working is invaluable for academic literature. Besides filling a gap in academic literature, outcomes may provide substantial benefits for the contest holders in obtaining the design results they seek. Another strength is the methodological approach. Namely, the contestants subjected to the study are unaware of their participation and therefore participant bias will decrease and internal validation will increase (Smith & Noble, 2014). Lastly, Logomyway.com handles a “winner takes it all” policy in which they define first place as ‘success’. The study however, deploys a top-3 listing based on the judging process as a definer of success, which accounts for a broader scope of definition.

Managerial implications

By optimizing the value system design, the joint payoff of the partners involved will be maximized (Carson et al., 1999). Therefore, Logomyway.com should invest in motivating contestants on different levels. First of all, logomyway.com, and other platforms alike, should motivate contestants to submit their creations early. This could be achieved by installing a rewarding incentive for early submission and by dividing the contest in separate phases. There will be both social (e.g. social capital or self image) and monetary rewards after each phase, until the final product is build. Secondly, they should promote participation for a longer period of time, by keeping contestants up to date about the contest. By doing so, contestants will likely feel more motivated to participate, possibly resulting in more submissions per contest. Lastly, Logomyway.com should motivate contestants to only submit after receiving additional valuable knowledge about the contest and previous designs, by setting a boundary amount of submissions of one per two days. This will improve quality of the designs, which in turn is favourable for the contest holder and co-contestants who can learn from the quality designs and implement it into their own designs.

References

Bockstedt, J., Druehl, C., & Mishra, A. (2015). Problem-solving effort and success in innovation contests: The role of national wealth and national culture. Journal of Operations Management, 36, 187-200.

Bockstedt, J., Druehl, C., & Mishra, A. (2016). Heterogeneous Submission Behavior and its Implications for Success in Innovation Contests with Public Submissions. Production and Operations Management, 25(7), 1157-1176.

Carson, S., Devinney, T., Dowling, G., & John, G. (1999). Understanding Institutional

Designs within Marketing Value Systems. Journal Of Marketing, 63, 115. doi: 10.2307/1252106

Dellaert, B.G.C. 2018. The consumer production journey: marketing to consumers as co-producers  in the sharing economy. Journal  of the Academy  of Marketing Science, forthcoming, 1-17.

Füller, J., Hutter, K., Hautz, J., & Matzler, K. (2014). User Roles and Contributions in Innovation-Contest Communities. Journal of Management Information Systems, 31(1), 272-307.

Gronroos, Chr. & Voima, P. (2013), Critical service logic: making sense of value creation and co-creation. Journal of the Academy of Marketing Science, 41 (2), 133-150.

Smith, J., & Noble, H. (2014). Bias in research. Evidence Based Nursing, 17(4), 100-101. doi: 10.1136/eb-2014-101946

Tsekouras, D. (2019) Customer Centric Digital Commerce Lecture 1 & Lecture 3 [Lecture 1 &3]

Wooten, J. O., & Ulrich, K. T. (2015). The Impact of Visibility in Innovation Tournaments: Evidence From Field Experiments. Wharton Faculty Research, 1-36.


Organic food, handmade products, Italian pasta, French wine, and… Customized-ideated products?


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

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

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

Crowdsourcing: Objective vs. Psychological Argument

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

Image result for lenovo z1


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

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

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

Image result for louis vuitton bag


My thousand dollar (customer-ideated) designer bag

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

How about business operations?

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

A future of customer-ideated products

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

References

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

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

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

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

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

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

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