Tag Archives: consumer

A potential for consumer value creation: Citymapper

February 23, 2019 sfvanhouten Leave a comment

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.

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.

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

Articles

Which products are best suited to mobile advertising?

March 5, 2017 373003oh Leave a comment

No doubt it is the first thing you look at when you wake up in the morning and the last thing you see before you go to sleep: your mobile phone. Imagine when checking the weather app before you leave the house a banner pops-up showing an ad for a new movie. What will be the chance that this banner will have any effect on you?

Mobile phones have become a part of our lives. According to eMarketer (2015a) US adults spend an average of 3 hours per day on mobile devices. Therefore, it is not surprising that global spending on mobile advertising has been rapidly growing up to more than $100 billion in 2016 (eMarketer, 2015b). Marketers want to grab the opportunity to capture your attention while browsing on your phone. However, marketers are not very happy with the effectiveness of their mobile advertising campaigns. Most of the time, they do not know what they are doing and are using a so-called ‘spray-and-pray’ mentality.

Research
Because of the large-scale investments that are being made in mobile advertising, a better understanding of factors affecting mobile advertising campaign performance is needed. This is where Bart et al. (2014) saw an opportunity for research. Their main question is: ‘Under what product-related conditions are mobile display advertisements effective in changing consumers’ product related attitudes and purchase intentions?’.

Bart et al. (2014) used a multi-campaign, multi-industry data set from a large U.S. market research agency. 39,946 consumers participated in their field study and completed a questionnaire about products featured in 54 mobile display ads from 2007 to 2010. This large and double mixed data set is one of the main strengths of the paper. The authors estimated Average Treatment Effects (the difference between the mean attitude or intention ratings in the exposed and control conditions) for attitude and intention, moderated by product involvement (high or low) and product type (utilitarian or hedonic).

Results
The most striking result from their study is that mobile display advertisements tend to only be effective for products that are both utilitarian and have high involvement, such as washing machines and family cars. These ads, on average, increased positive attitude by 4.5% and intention to buy by 6.7%, while hedonic and low involvement product ads (such as a sports car or toilet paper) had no effect.

An underlying psychological reason for this result is that high involvement goods are relevant and consumers are likely to have retained information about them. Even though mobile display ads do not include a lot of information they do have the ability to influence consumers by triggering their memory about a product that has already been assessed. In addition, a higher involvement with the product tends to be processed cognitively rather than emotionally, which is why mobile display ads work better for utilitarian products rather than hedonic products.

Implications
The main managerial implications of this study are that given a product, marketers can now better understand whether a mobile display ad will be effective or not. Also, given the decision of a marketer to invest in a mobile display advertisement campaign, they can have a better sense of what product to use and how to position this product in order to maximize campaign effectiveness.

So after reading these results and interesting findings, what do you think, will a banner on your phone showing a movie ad have an effect on you?

Sources:

Bart, Y., Stephen, A. T., & Sarvary, M. (2014). Which products are best suited to mobile advertising? A field study of mobile display advertising effects on consumer attitudes and intentions. Journal of Marketing Research, 51(3), 270-285.

eMarketer (2015a) Growth of Time Spent on Mobile Devices Slows available at: https://www.emarketer.com/Article/Growth-of-Time-Spent-on-Mobile-Devices-Slows/1013072

eMarketer (2015b) Mobile Ad Spend to Top 100 Billion Worldwide in 2016, 51% of Digital Market available at: (https://www.emarketer.com/Article/Mobile-Ad-Spend-Top-100-Billion-Worldwide-2016-51-of-Digital-Market/1012299

Business Case, Videos

Brigade: Redefining Politics, Civic Engagement and Democracy?

February 26, 2016 glenndejong Leave a comment

In today’s democracy, politicians have a tough time reaching millennials. In the same way as religion, Western politics currently faces difficulties to create affiliation with the latest generations. Especially, the themes of politics and voting have lost interest of the younger generations over time:

Continue reading Brigade: Redefining Politics, Civic Engagement and Democracy? →

Administrative, Articles, News

Grandma knows best: Online knowledge contribution

February 23, 2016 floriannegriffioen Leave a comment

Today, one of my group members stained my suede jacket with permanent marker whilst discussing our business idea. After panicking, the first thing I did is type the sentence “how to get ink out of suede” into Google. The pages I end up at are online communities, in which people share their experiences on the same problem and provide me with the knowledge I need to remove the stain. This example might sound very familiar to you: There are more than 2550 of such communities worldwide! These online knowledge sharing platforms provide a space for social interaction where individuals can obtain knowledge and feedback and exchange opinions on certain topics, such as stain removal.

Continue reading Grandma knows best: Online knowledge contribution →

Business Case, Mini Cases, Opinion, Student Ideas

Fan Funding – Let’s retake charge!

May 3, 2015 Niek A. van der Horst Leave a comment

Through crowdsourcing of many kinds, people can support causes they are passionate about and, in the case of equity crowdfunding, even buy shares with voting shares, such that they gain a say in the operations of the organization or project they support. However, can people really fund and take charge of the things they are most passionate about?

“Amongst all unimportant subjects, football is by far the most important.” – Pope John Paul II

The amount to which a large share of habitants of European countries, and many more worldwide, care about their favorite football club can hardly be overestimated. Though how often do we read about mismanaged clubs in severe financial problems? Opportunistic behavior of the top management of clubs unfortunately is rather rule than exception in the industry of football, often resulting in a short term focus, immense amount of debts and, in turn, the decay or even the liquidation of a club. Whereas the often very rich board members and owners are simply replaced after such disasters and move on with their comfortable lives, the fans are left in grief over the loss of their great pride and passion.

There is hope. In the last years, some highly interesting and promising initiatives have taken place to redistribute a part of the control of a club to its fans. Due to financial mismanagement, from the 2009/2010 season onwards, the former British Premier League side Portsmouth Football Club was relegated three times in a row and the club found itself on the brink of extinction. But, in 2013, the fans injected 2.5 million pounds in their club, through a community share issue with partial ownership rights for each shareholder. The fans, essentially a club’s customers as they buy tickets and merchandise, saved Portsmouth and made ‘Pompey’ the largest fan-owned football club in the UK. The investing fans are united in the Portsmouth Supporter Trust (PST), which has to approve any major decision of the club’s board, such as the issuing of loan capital or venturing in acquisitions. While this yet is a beautiful example of what consumer involvement can do, last year a crowdfunding campaign backed by Portsmouth fans went a step further even. On Tifosy.com, a newly established platform with the aim to stimulate active supporter backings and decision rights, raised 270,000 pounds for Portsmouth to construct its first-ever club-owned academy, right in the heart of the city of Portsmouth.

The video below tells the great story of the Portsmouth fans’ actions.

Two fans of 3rd Bundesliga side FC Fortuna Köln had an even greater ambition. The plan they launched last year proposed that any Fortuna supporter could fund its beloved club and, in turn, gained a vote on a wide array of possible decisions, including whether or not to buy a particular player, realize an investment to the clubs premises or even to sack the first squad’s manager. Every pound invested represents one vote, and the fan opinions alltogether would decide which actions the club had to take. Unfortunately, this highly democratic, wisdom-of-the-crowd enabling, crowdfunding campaign did not reach its funding goal, but the idea might very well turn out an industry changing one in the long run.

The organization Supporters Direct promotes and researches the cause of the so-called Supporters Share Ownership. In their extensive 2013 report on this topic, the authors identify a rapidly increasing interest of both fans and politicians, whereas club owners and board members, the incumbent agents in this industry, display a fierce reluctance to venture in this kind of acquiring funds. To overcome this deadlock, the authors recommend policy makers to establish a Community Football Fund which would be created as a social investment intermediary capable of securing various forms of social investment to assist supporter ownership. Supporters Direct is paving the way for widespread supported ownership of football clubs, giving hopes to all those fans opposing the modern reality of football, where clubs are subject to the dangers of the few elite owners spending billions, those of the short term oriented, opportunistic board members and the investors who view players and clubs as mere investment vehicles.

Sooner than expected, we might witness crowdfunding radically transform yet another industry; the highly conservative, but yet so deeply cherished industry of football. Let’s make it happen!

– Niek A. van der Horst

Crawley Town v Portsmouth - npower Football League One

Resources

Buy this team, April 2012, The Economist, accessible at: http://www.economist.com/node/21553493

Crowdfunding: Football’s 12th Man!, April 3rd 2014, FC Business, accessible at: http://fcbusiness.co.uk/news/article/newsitem=3057/title=crowdfunding%3A+football%26%23039%3Bs+12th+man!

Is fan ownership the answer to struggling football clubs?, November 27th 2013, The Guardian, accessible at: http://www.theguardian.com/social-enterprise-network/2013/nov/27/fan-ownership-football-premier-league

Portsmouth FC Academy campaign successfully raised £270,000, August 16th, Tifosy, accessible at: https://www.tifosy.com/en/campaigns/pompey-academy

Start-up-Netzwerk für Fortuna Köln, April 8th 2014, Kölner Stadt Anseiger, accessible at: www.ksta.de/koeln/crowdfunding-start-up-netzwerk-fuer-fortuna-koeln,15187530,28071496.html

Supporter Share Ownership, 2013, Supporters Direct, accessible at: http://www.supporters-direct.org/wp-content/uploads/2013/11/Supporter_Share_Ownership.pdf

Continue reading Fan Funding – Let’s retake charge! →

Business Case

Coolest Cooler: 21st Century Cooler that’s Actually Cooler!

May 3, 2015 dannyexalto Leave a comment

Consumer co-creation and crowdfunding go hand in hand. Consumers co-create value by funding the entrepreneur’s project on crowdfunding platforms. These platforms have brought forth awesome products: the Pebble Time watch, the OUYA videogame console, MaKey MaKey and many more! In this blog I would like to go into more depth about another awesome product brought to life through crowdfunding: the Coolest Cooler!

The Coolest Cooler, sometimes called the most successful campaign on Kickstarter ever, raised 13,285,266 dollar from 62,642 funders during its 52-day campaign. That equals to more than 265 times the projected goal. Pretty impressive!

What is this Coolest Cooler? Yes, it is a cooler, but not your average one. This cooler is ready for the 21^st century! “The Coolest Cooler is 60 quarts of AWESOME packed with so much fun you’ll look for excuses to get outside more often.” Its founder Ryan Grepper calls the Coolest Cooler a “portable party”. It contains a lot of practical functions a traditional cooler lacks. With the Coolest Cooler comes a built-in ice crushing blender for those margaritas or smoothies on the beach, a removable waterproof Bluetooth speaker, an USB charger for when your electronics are running low on battery, a cooler divider which can also function as a cutting board, a bottle opener, integrated storage for plates and knives, extra wide easy rolling tires (which makes it easier to use it on sandy beaches), gear tie-downs and built-in LED lights to light up the contents for when it is dark outside.

Given those impressive statistics about the funding this project received, you would think it was an instant success. However, what if I told you that before raising more than 13 million dollar in August 2014, it failed to raise 125,000 dollar in December 2013?

What turned this failure into a major success? According to the question “What did you do differently this time around?” in the FAQ section on the campaign page it was a combination of multiple factors. First of all, seasonality played a role. People are much more interested in coolers in the summer than in the winter. Naturally, when it is freezing outside, the last thing you will do is spending a day with your friends at the beach or at the park. Secondly, crowding in effects were present. They had a group of passionate supporters from their first campaign, who were willing to actively promote the project. And finally, of course, they learned from the feedback about the first concept and turned it into an improved product. Also, they lowered the bar to 50,000 dollar.

Nowadays, you can sign up for a waiting list to buy the Coolest Cooler when it is for sale to the public.

What do you think about the Coolest Cooler? Do you know any other awesome products created through crowdfunding?

References:

http://coolest.com

https://www.kickstarter.com/projects/ryangrepper/coolest-cooler-21st-century-cooler-thats-actually (all three images retrieved from this page)

http://money.cnn.com/2014/08/29/smallbusiness/coolest-cooler-kickstarter-campaign-ends/

Articles

Lost in Translation?

May 3, 2015 jiaxinhu Leave a comment

“Gengo, the Uber for translations.”

Youtube. Magento. Tripadvisor. Alibaba.com. These companies are using the service of Gengo, namely translations powered by its community. This platform provides professional human translation service and has completed already one million translation jobs. Founded in 2008 and by the end of 2013, Gengo has translated 150 million words. Everyone can join the community and sign up as a translator. Currently, 34 languages and 58 language pairs are available to bilinguals with a network of 14,702 translators across 114 different countries.

Gengo makes it very simple for diverse companies to integrate high-quality language translation through an API. As a homeworker, it is very easy to connect to Gengo and begin translating as a freelancer. The platform allows translators to work and manage their own time similar to Uber. Another neat feature is the education of beginning translators in order to increase the overall quality. In general, Gengo delivers a strong message and an innovative service.

This blog continues the awareness of crowdsourcing and the sharing economy. Like Uber, Gengo is a gamechanger by making an impact in the translation world. Not to mention, this company has already collected $ 24.2 millions from 23 investors. People-powered translation lowers the barrier to make an impact in the society by translating texts.

However, there are some disadvantages. Until recently, translation crowdsourcing already exists that is merely on voluntary basis for NGOs. Here comes Gengo, which mediates between the supply and demand of translators. They aim to turn it commercial and make translations affordable for companies. All bilinguals can join as a translator very easily without prior qualifications. But the most interesting part is the differentiation of ‘pro’ translators and ‘standard’ translators. The firm describes the pro level where accuracy is key whereas the standard level is focused on non-critical texts, such as blog posts and articles. Likewise the pay rates are differentiated. Usually, a professional translator asks $0.25 per word, but the pro-level and standard-level translators from Gengo receive $0.08 and $0.03 per word respectively. The workload and the related pay rate are perceived as unbalanced since many reviewers on Glassdoor.com have complained about the unreasonable pay compared to their effort.

Basically, Gengo enables businesses to scale quickly and to connect with a global audience. The platform let translators easily read and translate with one click. Not only the ease of the platform is important, the quality of human translation makes the texts easier to comprehend and more natural to read. Yet, the translators feel unsatisfied with their compensation. All thing considered, would you join as a Gengo translator?

Sources:

https://www.gengo.com

https://www.crunchbase.com/organization/gengo

http://www.glassdoor.com/Reviews/Gengo-Reviews-E778513.htm

Business Case, News

Tesla Powerwall: you and me can live off the utility grid

May 3, 2015 tlangenberg Leave a comment

Last week, Tesla announced the so-called Powerwall. The Powerwall is a home battery that can be charged via solar panels or via the grid when utility is low. By using the Powerwall, electricity can be stored when the sun is out and it can be used when electricity demand is the highest. Furthermore, the battery can be used as an emergency backup in a power failure as well. [1] Tesla also announced the Powerpack, which “is designed to scale infinitely”[2] and is targeted to (large) businesses. However this article will focus on the Powerwall to see whether it’s you and me can that can add value to a more sustainable world.

So, how is the electricity demand distributed? First, in the morning there is a peak in the amount of electricity used. You are not having breakfast in the dark, right? Then, during the day the electricity demand is decreasing rapidly. For instance, less light is being used and devices are using their batteries (thing about mobile phones). Last, the electricity demand is going sky high in the evening. Think about your own evenings: you are using your oven to prepare your meal, then you’re switching on your TV to watch a movie and then you put on multiple lamps to brighten your living room. Tesla’s Powerwall can store electricity produced during the day, to meet the electricity demand peak in the evening hours.

Electricity Demand Distribution. Source: http://www.teslamotors.com/powerwall?utm_campaign=&utm_source=direct-ts.la&utm_medium=ts.la-twitter&utm_content=awesm-inlinelinkcreator

By using Tesla’s brand new product in combination with solar panels, consumers can become fully independent from the utility grid. Consumers can start adding value to the world’s energy efficiency usage themselves! There is no need to point fingers at the big energy providers; you can take action yourself. But does the Powerwall provide the perfect solution for all of us? No, not yet. In an article about the Powerwall, Christopher Helman (Forbes) describes that Tesla’s latest innovation doesn’t make economic sense unless your house is solar panelled and entirely of the grid.[3]

Although the Powerwall isn’t economically feasible yet, the US government announced 30% federal tax credits of the battery price. Furthermore, California has a 60% be-a-fool-to-not-try-this rebate.[4] These rebates will increase the adoption of the Powerwall among people who can afford it and who are willing to live more sustainable. The income generated via the early adaptors can be used for further development of the batteries, which then will lead to decreasing prices. Besides, prices for solar panels are decreasing as quickly as batteries nowadays. Therefore, there is a huge potential market for Tesla: more and more consumers can start adding value to the worlds energy efficiency.

Battery and Solar costs. Source: http://www.bloomberg.com/news/articles/2015-05-01/tesla-s-powerwall-event-the-11-most-important-facts

To conclude, the introduction of Tesla’s Powerwall allows consumers to start living completely off the grid. Although it’s not economically feasible for the entire world yet, it’s a great first step. Early adaptors and innovation will lead to decreasing prices and more Powerwall users. So from today, let’s start adding value to a more sustainable world together!

[1] http://www.teslamotors.com/powerwall?utm_campaign=&utm_source=direct-ts.la&utm_medium=ts.la-twitter&utm_content=awesm-inlinelinkcreator

[2] Elon Musk during the Tesla Powerwall launch event in Los Angeles on April 30th, 2015: http://www.teslamotors.com/powerwall?utm_campaign=&utm_source=direct-ts.la&utm_medium=ts.la-twitter&utm_content=awesm-inlinelinkcreator

[3] http://www.forbes.com/sites/christopherhelman/2015/05/01/why-teslas-powerwall-is-just-another-toy-for-rich-green-people/

[4] http://www.extremetech.com/extreme/204702-what-the-tesla-powerwall-home-battery-means-inexpensive-time-shifting-for-solar-energy

Business Case

Customers-first philosophy: Success of e-commerce giant Alibaba

May 3, 2015 okaya88 Leave a comment

The chairman and CEO of Chinese e-commerce giant Alibaba has a deep appreciation for the role of consumers in navigating a business. Alibaba’s social responsibility includes providing 0.3% of their revenue to environmental protection. His priority list, even surpassing social responsibility, includes businesses concentrating on Alibaba’s beliefs and hopes, the reasons as to why they got into this business and their approach in satisfying consumers, in contrast to focusing solely on profits and margins.

There are vital lessons that other businesses can learn from Alibaba’s customers-first philosophy:

Businesses need to think like their customers.

Many technology innovators accentuate technology and place products above everything else, thus loosing sight of the target audience. Alibaba states that they look at technology through the eyes of their consumers. The great achievement of Alibaba thus far has been achieved through placing consumers first. This can be seen by their acquired knowledge and understanding of the Chinese Market, which has had an effect on their approach to even their product variety. They help small businesses and are adamant about caring more about them than caring for yourself.

“Focus first on customer satisfaction and second on teamwork. Shareholders’ interests come third because they are outcomes, not inputs.”

-Jack Ma, Alibaba chairman and CEO

Alibaba makes it effortless for small businesses to use their website as they have constructed a customer-oriented design that makes it more easy for consumers to seek and buy items on this website.

Businesses should treat their consumers like a crystal ball.

Alibaba is dedicated on having a long-term vision for their business. The company has previously stated that this long-term vision requires them to not be sidetracked by transitory of the economy as it will have its ups and downs.

Alibaba achieves this by being focused on the consumer and watching their actions as they have also predicted the rise of customer-to-business (C2B) corporate strategies for the near future, and predict that consumers will be empowered resulting in fully commanding their needs to companies.

Businesses must create value for their consumers.

Alibaba acknowledges that consumers are more then customer who buy products. The consumer of today is a member of society that is concerned with their environment and social outcomes.

“Your business model, it should create value and be good to society.”

– Jack Ma, Alibaba chairman and CEO

Companies must have this wider lens perspective when it comes to consumers. In this new era of empowered consumers, they select the brands that demonstrate the same ideals that support theirs, making them the values-driven consumers.

References:

Najberg, A. (October 20, 2011) “Jack Ma: Business Model ‘Should Be Good to Society’” The Wall Street Journal (WSJ Blog) Web. http://blogs.wsj.com/digits/2011/10/20/jack-ma-business-model-should-be-good-to-society/

Claveria, K. (December 8, 2014) “What CMOs and CEOs can learn from Alibaba’s Jack Ma” Visioncritical.com Web. https://www.visioncritical.com/jack-ma-customer-centric/

Photo credit:

<http://graphics8.nytimes.com/images/2014/09/19/business/dbpix-alibaba-jackma5alt/dbpix-alibaba-jackma5alt-blog480.jpg>

<https://communities.intel.com/servlet/JiveServlet/showImage/38-16958-235873/age+of+the+customer.png>

Articles

Dynamics that affect consumers’ online product opinions

May 3, 2015 356050lo Leave a comment

Have you ever given your opinion online? Most likely, your answer will be no, even though current developments in technologies have made it easier to share your thoughts online. The 90-9-1 rule entails that in any group of 100 people, there is on average one person that produces 90% of the content, nine persons that provide 10% of the content, and the remaining 90% never contributes to anything online. That is why the last group is better known as ‘the lurkers’ – they merely observe and follow the contributions of the first 10%. Much research has been going on to study the reasons for being a lurker and how these lurkers can be delurked (e.g. Xia et al., 2012). Furthermore, the applicability of the 90-9-1 rule is subject to debate and consequently changes to this rule such as 70-20-10 or 80-19.99-0.01 have been proposed. The fact remains that there are still many more people that do not contribute their thoughts online.

What drives this small number of people to publish their thoughts online and how do the previously posted reviews affect their contributions? Moe and Schweidel (2012) studied how previously posted ratings can influence someone’s posting behavior in terms of whether to contribute and what to contribute. They focused on consumers’ posting behavior after they have used the product and formed their post-purchase product assessment. The dataset used consists of 3,681 contributions of 2,436 customers of an online retailer of bath, fragrance, and home products over the course of six months. A sample of 200 products was taken, which included 100 most rated products and 100 additional products which were chosen at random. The online contributions included both a score on a five-star scale and a review text.

The results of their study are the following. In general, Moe and Schweidel (2012) observed that the tendency to post was different across individuals and individuals preferred different posting environments. Individuals who were not used to post product opinions were more positive and exhibited bandwagon behavior. Frequent posters (activists) were controlling the online product rating environment by contributing more negative and differentiated opinions compared to the opinions that were expressed before. Activists increasingly participated over time, whereas the involvement of other group decreased over time. Positive environments led to more contributed opinions, and negative environments decreased the amount of opinions contributed. Additionally, Moe and Schweidel (2012) found that the contributed content was subject to adjustment effects, which entails that the contributed thoughts affect the content of future postings. Furthermore, they found that the posting decision was subject to selection effects that can affect the composition of the posting population (Moe & Schweidel, 2012).

Previously private conversations about products have become publicly available to potential customers and the firm. Before, firms have never been able to get so close to their customers and engage them in such a relevant manner. Increasing customer insight and engagement is highly important in influencing the success or failure of a product. Knowledge gained on customer experiences can aid the firm in driving benefits throughout the value chain by forecasting demand and creating product promotions, among other benefits. Therefore, the previous results are important for consumers and firms. Consumers and firms should take into consideration that online product reviews do not always reflect the opinion of the whole customer base, but rather the opinion of the vocal and more negative activists. In addition, firms should not overreact to negative feedback because there is a high chance that the more positive majority may have chosen not to participate in the online forum. In order to deal with negative feedback, the firms could provide the most silent customers with incentives for posting reviews.

Sources:

Xia, Huang, Duan & Whinston (2012). To Continue Sharing or Not to Continenue Sharing? An Empirical Analysis of User Decision in Peer-to-Peer Sharing Networks. Information Systems Research, 23(1):247-259.

Moe, W.W. & Schweidel, D.A. (2012). Online Product Opinions: Incidence, Evaluation, and Evolution. Marketing Science, 31(3):372-386.

Business Case, Mini Cases

Two sides of the same coin: Co-creation in the videogame industry

May 2, 2015 419833sl Leave a comment

Value co-creation has started to spread more and more across various industries during the last decade. Media consumers have taken up the role of media producers, as firms give them the opportunity to design, produce or market content. And the game industry is no exception to this phenomenon.

Examples of games such as Spore and Little Big Planet, that rely heavily on user generated content, have introduced a new era for videogames, where the role of co-creative gamer is born (Banks & Potts, 2010). While many benefits may potentially be derived from this new trend, there are also dangers that might lead to utter failure. Two opposite case studies prove that it is not easy to find the keys to success.

Fury was an online game that was released in October 2007. During its development phase, the game looked quite promising. There were a lot of expert gamers that spent hours playing the open beta version, providing the designer company, Auran, with valuable feedback for improvement (Banks & Potts, 2010). In addition, since the game was used by some highly-ranked members of the online gaming community, many players were intrigued to try it out resulting in a form of online word-of-mouth marketing. The developers changed Fury quite a lot, always according to user feedback they were getting. However, in the end this advantage backfired. Upon the game’s release, the reviews were disappointing to say the least. Hardcore gamers, who spent hours providing input to improve the game, accused Auran that they released the game too early and did not take enough time to carefully implement most things discussed in the feedback. As a result, the gaming community turned its back on the project and Fury was shut down shortly after its release.

Co-creation can indeed backfire…

Auran underestimated the consumers’ needs. As many expert gamers pointed out, they did not change some of the key aspects of the game simply because they did not want to. Introducing consumer value creation can disrupt some of the traditional models on which production in a certain industry is based (Banks & Potts, 2010). In this case, the expert producers disregarded the customers’ opinions and insisted on something that turned out to be unacceptable for the market. Nevertheless, there is always a way to find the right balance between company and consumer value creation. And the case of World of Warcraft makes a perfect example of this balance.

Blizzard is one of the largest gaming companies in the world. One of its biggest successes came with the release of the online game World of Warcraft, which is still the largest online game 10 years after its release with more than 10 million subscribers. But how did Blizzard use value co-creation effectively? Apart from the open beta version that was made available prior to the game’s release, the company made available, along with the full version of the game, a free API through which users could customize their user interface (Davidovici-Nora, 2009). Therefore, Blizzard put minimal effort in designing a simple and easy to use UI for casual gamers, while giving the opportunity to more hardcore consumers to enrich that UI according to their specific needs. They achieved this by creating add-ons that provided the original UI with additional functionalities. Users were also able to share their add-ons through the game’s online community. What Blizzard achieved, apart from minimum effort costs in interface design, was to keep the core of the game intact as the developers wanted it (Davidovici-Nora, 2009). But on the other hand, they empowered gamers by allowing them to create tools that would make their experience better.

The opposite side of the coin: co-creation at its best!

The two case studies represent two different models of co-creation. On the one hand there is the use of open beta versions, which give the consumer the role of game tester and provide valuable feedback to the companies. In this more traditional model, co-creation happens before the marketing of the game (Davidovici-Nora, 2009). On the other hand, Blizzard used the API to allow gamers to create value even after the game’s marketing and to “pass on” to them the role of game developer, even to a certain extent. However, it was not this difference that determined the success or failure of the projects. Both cases show that value co-creation can be a powerful ally, but as companies give customers more power over their products, they need to take these newly forged relationships into account more seriously.

Hence, the gaming industry has reached an era where gamers are more useful than ever, as they do not purely consume but they are actively involved in game development. The lesson to be learned is that, as consumers gain more power over product creation, firms need to be ready to abandon some of the more traditional business models in order to make a successful transition into this new era of co-creation.

References:

Banks, John, and Jason Potts. “Co-creating games: a co-evolutionary analysis.” New Media & Society (2010).

Davidovici-Nora, Myriam. “The dynamics of co-creation in the video game industry: The case of world of warcraft.” Communications & Strategies 73 (2009): 43.

Jenkins, Henry. “Why Co-Creation Matters: An Interview with John Banks.” Henryjenkins.org (2014)

Business Case

Turn customers into brand advocates by using participation marketing!

April 26, 2015 dannyexalto 1 Comment

Consumer value creation is hot and happening! The successes that can be achieved when crowdsourcing production processes and relying on consumers to create value are plenty: Threadless’s users create and vote on clothing designs that eventually will be produced, Nike offers consumers to design their own pair of shoes, Lay’s challenged its consumers to come up with a new flavor, et cetera. One area in specific – marketing – is interesting when looking at how consumers could create value for a company.

“Participation marketing” or “engagement marketing” refers to a marketing strategy that encourages consumers to participate in the evolution of a brand. This marketing strategy treats consumers not solely as passive receivers of messages, but views them as actively involved producers and co-creators of marketing programs. Two big players are using it with success: Coca-Cola and Yoplait.

With the average person in the United States drinking the equivalent of 275 cans per year, there is no need for Coca-Cola to focus on increasing their immediate sales transactions and acquiring new customers. Coca-Cola is shifting towards creating a more long-term emotional connection with their customers. One successful example is their recent “Share a Coke” campaign, where they replaced their product logos with popular names. This invited consumers to start a big wave of referrals on social medium websites, which resulted, for instance, in a crazy 341,000 posts on Instagram with the hashtag #shareacoke. This is one of the ways Coca-Cola uses to build loyalty and engage customers.

Another example of participation marketing can be found at Yoplait. Yoplait’s annual “Save Lids to Save Lives” program donates 10 dollar cents to a breast cancer foundation for every pink foil yogurt lid that customers mail back to the company. Since 1997, around 35-50 million dollar has been donated by Yoplait and their parent company! This translates into hundreds of millions of customers mailing their yogurt lids to the company! When customers actively engage with the campaign in order to support the cause, they are more likely to purchase Yoplait’s products and encourage others to do it as well. Customers are becoming so-called brand advocates. This way, Yoplait is building brand loyalty whilst also increasing sales.

The lesson companies should take from these two examples is to shift their focus from viewing customers solely as receivers of marketing and buyers. They should engage with them to create value together. This way they will become lifelong loyal customers and brand advocates. Don’t think only big companies with enormous marketing budgets can pull this off: the ALS association created the “Ice Bucket Challenge”, which went extremely viral. This led to increased customer engagement and more donations.

What do you think? Do you know other great examples of companies that used participation marketing?

Articles, Business Case, Opinion

Are you ready to beat the ‘Snake’ high score again?!

April 26, 2015 tlangenberg Leave a comment

In the past, Nokia has been the dominating player within the mobile phone industry. If you never have seen the 3310 model or played ‘Snake’ on one of the previous Finnish devices, you were probably born after the launch of the 3310 model in September 2000 (Techradar, 2014). In the upcoming years, Nokia’s senior management didn’t believe that the smartphones would conquer the mobile industry. A clear lack of vision: 1.2 billion smartphones were sold last year (NRC Q, 2014). When Nokia finally started selling smartphones, other players were already dominating the market. Nokia’s sales were dropping and the mobile department was sold to Microsoft in 2014.

Last week, Re/code announced that Nokia is planning to return to the phone market in 2016 (Re/code, 2014). Initially, Nokia agreed with Microsoft not to manufacture any mobile phones until 2016. Although this agreement was signed, the Fins are allowed to sell Nokia products if manufactured by another company. Using this loophole, Nokia can start selling phones again (Emerce, 2014).

It will be difficult for Nokia to attract customers when entering the highly competitive smartphone marker. Often marketing spending is invested in sales promotions to influence customers’ buying behaviour and attract new customers (Kim et al., 2014). To determine what the best strategy is for attracting new customers, Kim et al. (2014) compared price discounts and sampling to a more innovative method called pay-what-you-want (PWYW). When using a PWYW strategy, customers are able to determine the selling price themselves.

Kim et al. (2014) found that PWYW is an entertaining way of promoting products to consumers. It can both lead to a higher word-of-mouth effect and more consumers that want to benefit from the promotion. Furthermore, the researchers found that the prices paid in a PWYW situation are significantly different than zero. So, PWYW is not just a fancy name for free sampling; people are more likely to pay for products even when they can get it for free (although the price paid is lower than the original price). PWYW can be an attractive way for Nokia to get in contact with potential customers and to create a positive hype (Kim et al., 2014).

Compared to price discounts, in a PWYW situation consumers tend to pay less for a certain product. But, since PWYW attracts more consumers, Kim et al. (2014) found that this effect was compensated. If Nokia wants to settle in a highly diversified market again, it’s very important to reach a high number of customers. Instead of competing the current smartphone providers using price discounts, Nokia should use a PWYW strategy to reach more people and while earning more money.

Smartphones are expansive products. Therefore, using a PWYW strategy to conquer the market can be risky. Although Kim et al. (2014) didn’t investigate the effect of it, they suggest using PWYW in a more restricted way in these cases. For instance, consumers can determine their discount based on a predefined list of discount percentages. By doing this, Nokia can influence the magnitude of the promotion but still take advantage of the PWYW benefits.

Using a PWYW strategy can provide Nokia with a lot of new, and recurring(!), customers. So, are you ready to beat the Snake high score again?

References

Kim J. , Natter M., & Spann M. (2014) Sampling, discounts or pay-what-you-want: Two field experiments. International Journal of Research in Marketing, 31 (3), 327 – 334.

http://www.techradar.com/news/phone-and-communications/mobile-phones/nokia-s-3310-the-greatest-phone-of-all-time-1287636 [Accessed on April 21, 2015]

http://www.nrcq.nl/2015/04/19/smartphones-round-the-world [Accessed on April 23, 2015]

http://recode.net/2015/04/20/nokia-plots-2016-return-to-phone-market/[Accessed on April 23, 2015]

http://www.emerce.nl/nieuws/nokia-gaat-weer-smartphones-maken[Accessed on April 21, 2015]

Articles

Be famous and (dramatically) increase your number of followers!

April 26, 2015 360727mv Leave a comment

Only then you are credible…

I almost wanted to start with: “You cannot trust product tweets of celebrities…” But if that would be a surprise to you, I have some other shocking news to you: Santa doesn’t exist. However, if everyone knows the tweets are set up by the brands themselves, and the celebrities are paid for such tweets, why would brands still spent million dollars to celebrity social media product endorsement?

Opendorse did research to those product endorsement tweets: a tweet from Cristiano Ronaldo is valued $304.000(!) (See source beneath for more numbers). Note that this is the actual value of the tweet for the brand itself, so it does not say celebrities are really paid that amount.

As we know that those tweets are valuable and that it does not matter that we, actually, all know that those tweets are not “real”, what makes the “fake opinion/tweet credible to us, the consumer. That is what Jin and Phua investigated in 2014: “ Explicate the conditions under which celebrities can be leveraged as effective catalysts for brand-related E-WoM on Twitter.” They created semi-fictious celebrity twitter pages, where after they let students (east coast of US) fill in a questionnaire based on these profiles (which off course included a product endorsement tweet).

Jin and Phau found that high numbers of followers results in higher credibility of the celebrity (more physical attractive, trustworthy and competent). On top of that, positive brand tweets of a celebrity with a high number of followers results in higher product involvement/buying intention. This effect is strengthened in case of a prosocial celebrity. In contrast, a celebrity with a low number of followers does not effect product involvement.

(In order to differentiate between types of celebrity (prosocial/antisocial), participants read an article of the celebrity either engaged in charity work or involved in drug abuse and/or adultery scandal.)

On top of that, it is interesting that “we” are more willing to share a tweet if it is coming from a celebrity with a low number of users and if it is negative about a specific brand/product. Probably because we think that a tweet from someone with a high number of followers will be not new to our own followers.

Concluding, celebrities are more credible than ordinary users towards twitter users. If a brand wants to start with twitter celebrity marketing, they need to focus on the number of followers (not only because of the reach, but also because of the credibility) and the behavior of the celebrity. Maybe it would be even better to contact a not that well-know celebrity and let him upload a negative tweet about a competitor. It will be shared more often by other twitter-users, and then it will maybe get more attention.

However, we must not forget that a celebrity, who will promote a lot of products using twitter, will be less credible in the end. Besides, I doubt if everyone knows how much followers his or her followers have.

Then I got one last question to you: if you had to set up one celebrity tweet for Microsoft surface tablet, who would tweet what text, and tell me why? Besides, tell me why this tweet didn’t worked out well:

In turn I got one tip for Santa to be credible for old and young again: Open a twitter account and dramatically increase your number of followers… You are already famous!

Note: If you didn’t see Oprah’s mistake, take a look with what device she uploaded the tweet.

Seung-A Annie Jin & Joe Phua (2014) Following Celebrities’ Tweets About Brands: The Impact of Twitter- Based Electronic Word-of-Mouth on Consumers’ Source Credibility Perception, Buying Intention, and Social Identification With Celebrities, Journal of Advertising, 43:2, 181-195.

http://opendorse.com/blog/top-75-highest-paid-athlete-endorsers-2014/

Articles

So Whaddya Think? Consumers Create Ads and Other Consumers Critique Them

April 25, 2015 349212jp Leave a comment

With the availability of online creative tools, consumers create ad-like communications on their own or in response to company contests. These consumer-generated ads (CGA) are like word-of-mouth (WOM) in that they are consumer-to-consumer communications, yet they have the look and feel of traditional advertising. Ertimur and Gilly (2012) examine consumer responses to both contest and unsolicited CGA and company ads using data gathered from consumers via netnography and depth interviews.

What makes CGA highly relevant for consumer researchers?
They allow consumers to communicate on behalf of (or in opposition to) firms and participate in creating brand images. The resulting ads constitute evidence of consumers perceptions of the brand as well as the firm. Consumers say they are more likely to be influenced by user-generated content (UGC) than by information coming directly from advertisers and marketers and that UGC outranks other forms of advertising in terms of gaining consumer trust.

The paper gave the example of a school teacher named George Masters, who in 2004 showcased the 60-second animated ad he had created for the iPod Mini by uploading it to his personal website. The video could have easily been mistaken for an ad produced by Apple. The unsolicited ad caught the attention of fans, bloggers, and marketers, and was viewed more than 500,000 times within a month. This is an example of a CGA.

With CGA, consumers create ads for products. Essentially, there are two types of CGA: 1) those solicited by companies through contests and 2) those created by consumers on their own. While unsolicited CGA are initiated as well as created by consumers, solicited CGA can be viewed as hybrid forms of content that are firm-initiated and consumer-created. With both types of CGA, consumers perform tasks that were previously handled by companies. Hence, this new type challenges the traditional view of advertising as a form of company-controlled communication.

Ertimur and Gilly (2012) found in their research that consumers respond to both types of CGA by engaging with the ad rather than the brand, much like an ad critic, while company ads elicit brand associations. Unsolicited CGA are seen as authentic, but not credible, while contest ads are seen as credible, but not authentic, revealing a boundary condition to the conventional view that authenticity leads to credibility.

I think that CGA will be more and more important for companies, because consumers have the availability to online creative tools. Companies should always be aware of this and make use of the CGA.

Reference:
Ertimur, B. and Gilly, M. (2012). So Whaddya Think? Consumers Create Ads and Other Consumers Critique Them. Journal of Interactive Marketing, 26(3), pp.115-130.

Articles

Do Movie Reviews Affect the Box Office Revenues?

April 24, 2015 annisadhantri Leave a comment

The existence of Internet has changed our way of living. It has been a huge part of our life, one we simply cannot live without. We rely on it in almost every aspect of our lives, including when we seek for information. This also applies when we’re deciding what movies to watch. Before go to the cinema and watch a particular movie, some people usually checked the movie’s online reviews first. These movies’ reviews are online user reviews, and it is a form of electronic word-of-mouth (eWOM). According to Duan, Gu, and Whinston (2008), eWOM influences consumer purchase behaviour while it’s also the outcome of consumer purchases. But then, how these online user reviews actually impact the offline purchase?

There are three measures of online user reviews, the volume (Liu 2006, Duan et al. 2008), the valence or the average (Liu 2006, Duan et al. 2008, Chevalier and Mayzlin 2006), and the variance in reviews (Godes and Mayzlin 2004). Chintagunta, Gopinath and Venkataraman (2010) measured the impact (valence, volume, and variance) of national online user reviews on designated market area (DMA)-level local geographic box office performance of movies in the United States. What’s different about their study is they used local geographic data instead of national-level data (used by previous studies) and the ‘when’ and ‘where’ a movie is released are taken into account. Thus, they measured user reviews when a movie was released in a market and those were written by users where the movie was previously released. The impact was measured by combining data from daily box office ticket sales on 148 movies released from November 2003 to February 2005 with user ratings from the Yahoo! Movies website. They found that the overall movie revenues is greatly affected by the opening day gross. As it was conducted on DMA, movie and market fixed effects were included thus taking into account their differences including movie genre and market size, and some other variables was also controlled such as advertising level and number of theaters. In their first study, using the local data, they found that the average user ratings influenced the box office performance the most. This finding is interesting since most previous studies found that it is the volume of reviews which matters the most to box office revenues. But when the national-level data was used, they arrived at the same results as previous studies. And at the last part of the study, they attempted to explain these results difference by using national-level models with market-level controls. This method gave the same result as the first study, the average of user ratings has the greatest impact on the box office revenues. It concluded that it is important to determine where the movie was played, whether on “new markets” or “old markets”, and only then the “true” effect of user ratings can be measured.

As for us the movie goers, what the paper discovered is that we’re mostly affected by the average of ratings in deciding what movies to watch. Yet, how many people rated the movies (volume) is also an important aspect, as I would believe a slightly lower rating with much higher volume rather than a higher rating with much lower volume. In other words, volume and variance make a rating/review more trustworthy. Which one would you prefer?

Source : IMDB

References

Chevalier, J. A., and Mayzlin, D. 2006. ‘The effect of word of mouth on sales: Online book reviews.’ Journal of Marketing Research, 43(3), 345-354.

Chintagunta, P.K., Gopinath, S. and Venkataraman S. (2010). ‘The effects of online user reviews on movie box office performance: Accounting for sequential rollout and aggregation across local markets.’ Marketing Science, 29(5), 944–957.

Duan, W., Gu, B., and Whinston, A.B. (2008), ‘The Dynamics of Online Word-of-Mouth and Product Sales — An Empirical Investigation of the Movie Industry,’ Journal of Retailing, 84(2) 233-242.

Godes, D., and Mayzlin, D. 2004. ‘Using online conversations to study word-of-mouth communication.’ Marketing Science, 23(4), 545–560.

Liu, Y. 2006. ‘Word of mouth for movies: Its dynamics and impact on box office revenue.’ J. Marketing, 70(3), 74-89.

Articles

Does Chatter Really Matter?

April 24, 2015 356050lo Leave a comment

Let’s say you are planning to buy a new HP laptop. You have spent quite some time comparing laptops online and you have found that the HP Pavilion 17-f240nd perfectly matches your needs. The reviews that you have read seemed truthful and you have a feeling that you will be satisfied with your new laptop. You are glad to know how other consumers experience the HP Pavilion and what they all use it for. The internet with its online product reviews and ratings have made your life so much easier! After you have used your new HP you might even contribute a review, as you want others to know how you feel about the product. Even when you are dissatisfied with it, you might write a review as you want to prevent others from buying it. Clearly, product reviews can help consumers in making decisions and thus affect firm sales. However, are these product reviews also related to other important performance metrics of the firm?

Tirunillai and Tellis (2012) studied the relationship between user-generated content (UGC) and stock market performance of the firm. They examined product reviews and ratings (chatter) because these are rich in product-related information. Consumers frequently post videos or blogs about certain products, however these often contain too much information which is not always relevant to a specific product. Tirunillai and Tellis (2012) argued that the signal-to-noise ratio is too low in these types of UGC and is therefore not taken into consideration in their research. Various markets were taken into account over a period of four years (from June 2005 to January 2010). These markets range from personal computer and data storage, to toys and footwear. Among other, consumer reviews for HP, SanDisk, Mattel, and Nike were examined.

To start with, they found that most of the online chatter was positive. This result was found across all markets with an average of 75% of chatter being positive. Moreover, the volume of both positive and negative chatter showed an upward trend. This is beneficial for firms and investors, because the other findings show that the volume UGC predicts abnormal returns and increases in trading volume on the short-term as well as on the long-term. However, negative chatter has a significant negative effect on returns, whereas positive UGC has no significant effect on returns. Offline television advertising can be used to increase to volume of chatter and decrease negative chatter at the same time. Lastly, negative consumer chatter increases idiosyncratic risk, which is asset specific risk that is not correlated to market risk. Logically, firms should keep this risk at a minimum in order to not discourage investors.

The previous results are important for investors and managers. Investors that experience information asymmetry should turn to UGC in order to find more information about the firm’s performance. UGC often includes information that is not (yet) widely known and more importantly, when UGC includes a lot of negative chatter, investors should now know they should not invest in this particular firm. For managers it is important that they trace the negative chatter and take corrective action as soon as possible, in order to prevent losses in shareholder value. For instance, to counter negative chatter about a product, the firm can start broadcasting television ads. Based on the study and our own experience, we can conclude that consumer chatter is not only informative for other consumers, but also for firms and investors.

Source:

Tirunillai, S., & Tellis, G. J. (2012). Does chatter really matter? Dynamics of user-generated content and stock performance. Marketing Science, 31(2), 198-215.

Business Case

The social buying website

April 21, 2015 402446ta Leave a comment

Ever had the experience that you spotted something cool on a social website such as Instagram and Pinterest and you wanted to get it, but more often than not you could not find a shop to buy it from? As a consumption economy we always want new and fancy things in our lives and online shopping has made this much easier.

The website Fancy.com solves this problem by allowing the direct connection between seller and buyer in a social environment. Fancy is the place that allows you to discover and buy amazing things curated by the global community. So how does this business model work?

The website can be compared to many different websites, it allows you to buy high-end things on a website as as good looking as Tumblr/ Pinterst and most importantly as money-driven as Amazon. It is based on a new retail model that allows you to shop by accidentally discover new items instead of you deliberately searching for them. In fact it works much the same way as Pinterest, only the website has a direct purchase button at every product displayed.

It works as followed, you spot something on the internet and save the image because you like it. After that you go to the website and upload the photo of the product including a title, you add a link to the companiy and set it under the correct category. The image is than posted on you Fancy feed and is indexed by the Fancy database. The company is then notified that the product is on the Fancy website and the company can then ad a direct buy link. After this my image, that I uploaded, is visible on my news feed and all my friends are able to buy the product directly on the Fancy website. Fancy business model is taking a 10% commission on each of the products sold,

This business model is such an success that even Pinterest is planning to introduce a “buy” button that would let users purchase some items from inside the online scrapbooking service. This would mean direct competition with a website that already controls a 23% of traffic to e-commerce sites (Business insider, 2015). Furthermore, the approach used by Fancy can create problems in the institutional arrangements, the user generated content has a lingering problem with liability. Especially copyright infringement is a constant threat for the Fancy website, the wrong content can result in a law suit against the website itself.

However, it can be concluded that this new social buying trend is potentially changing the way we shop, this also means that websites such as Amazon need to compete with a new kind of buying behaviour. After all, for most consumers this trend is a welcoming site, it creates new value in the online shopping experience.

Sources:

Fancy.com

Business insider: http://uk.businessinsider.com/pinterest-buy-button-2015-2?r=US

Articles

Choose your customers strategically

April 6, 2015 jiaxinhu Leave a comment

Have you ever complained about a service or product at your most favorite firm’s Facebook page? Nowadays, we live in a complex world with an overload of choices. This results in different types of customers with their own specific demands, but it is hard to comply with every single niche. Firms are confronted to choose which type of customers they want to serve. This is the reason whether you feel neglected by your favorite firm or not.

In this article you will understand why a particular firm has a legitimate reason to turn down your requests and ideas. First, a theoretical part will be discussed. Followed up by a practical implication. At last, a discussion point is stated.

A framework called ‘Strategic Value Assessment (SVA)’ is elaborated in the article “Strategic Value Assessment and Explorative Learning Opportunities with Customers” by Nijssen et al. (2012). Initially, it starts with the innovator’s dilemma, i.e. firm struggles between the choice of responding to customers’ requests and protecting the long-term competitive position. Consequently, SVA provides a priori assessment of partner selection within the dynamic environment we live in. Why is SVA beneficial? A collaboration with every single customer is very costly and do not add value to the firm. Such a perspective best guarantees that the selected collaboration will bring strategic value, and specifically, allow for taking in new knowledge that stimulates new business development. It will safeguard new, exploratory learning that will materialize in future cash flow and revenue.

In figure 1, a figure with all the variables and hypothesized relations are disclosed. The dependent variable “explorative learning” is the ability to extract knowledge from the collaboration with a customer and develop technological extensions and turn it into appealing new products for new markets and customers.

Secondly, ‘intensity of collaboration’ increases the involvement and interaction between the two parties. As a result, the two parties become more familiar with each other. Therefore, familiarity increases the chance of exchanging knowledge.

Thirdly, ‘lead users’ are a source of radical new product ideas. Without SVA the firm cannot distinguish the good and bad projects. However, with SVA, the firm chooses only the product ideas of lead users and avenue to future growth.

Lastly, under conditions of strong ‘dependence’, firms pursue short-term sales and profits by collaborating with customers that reduces the strategic and long-term effectiveness of the collaboration which results in focusing mainly on existing products and neglects developing new products for potential customers and markets.

Testing these variables with a sample of Dutch SME’s consisting a total of 136 firms provides the following insights:

SVA has a positive impact on explorative learning which is beneficial to the firm for retaining a competitive advantage and sound future revenues. Also SVA has a directly influence on lead users and intensity of collaboration.
Implementing SVA as a framework increases the likelihood that a firm will collaborate with its lead users.
Reflecting partner selection at the start of the project (a.k.a. fuzzy-front end) of a new product development process evades the dependency problem. SVA prevents becoming too committed to only one option in an early stage rather than exploring all the potential opportunities.
SVA can be used to distinguish the good ideas from the bad ones. It may serve as a justification to reject less promising new product venues suggested by current customers.

A practical implication:

Today, co-creation is a common phenomenon and widely discussed in the literature. However, refusing a customer and its requests put the relation between the two parties in jeopardy. Therefore, the short-term profits of the firm might decrease. If the firm raises awareness of the SVA as a motivation for the firm’s move, the customer’s understanding increases. Hence, this may preserve the relationship.

Discussion statement:

A limitation of this paper is the focus on Dutch SME’s which are relatively small in comparison with Amazon, Google or Apple. Assume the sample includes financial unconstrained high tech firms with a higher budget for R&D projects in combination with customer collaboration. The sample in the paper involved an average of 33 FTEs and 96% of all firms have 1 to 99 employees.

At the firm’s perspective, is it a good decision to implement SVA and deliberately pursue only the requests of lead users instead of the plebs?

My opinion:

I think it would be a matter of business strategy that the firm pursues. Choosing between focus strategy and an industry wide target strategy.

Nijssen, E.J, Hillebrand, B, de Jong, J.P.J, & Kemp, R.G.M. (2012). Strategic Value Assessment and Explorative Learning Opportunities with Customers. Journal of Product Innovation Management, 29, 91–n/a. doi:10.1111/j.1540-5885.2012.00960.x

Articles, Business Case

User-driven firms vs. Designer-driven firms. Which products do consumers prefer and why?

April 5, 2015 deshnakhedoe Leave a comment

Over the past years, researchers have identified a new role that users can fulfil in the value creation process of firms. User-driven designs have proven to be strategically effective in many different industries. Examples are Apache (software), Quirky (household products), Muji (furniture) and Threadless (apparel). User-driven design can be defined by an innovative approach in which organizations encourage their user communities in generating ideas for innovative products. In this way the users take the lead in the design process by submitting ideas based on their wishes and needs. This is an easy and effective way for the company to involve users and might be more successful since, the real time needs of the consumers are taken into account.

The article by Dahl, Fuchs and Schreier (2014) focuses on the impact of this innovative strategy on non-participating, observing users. The study has found that the implications of this effect can differ. Therefore the authors tried to investigate why and when consumers actually prefer products of user-driven firms in order to provide more insight for user-driven markets.

Three experimental studies conducted in this research have resulted in interesting findings. First of all, non-participating, observing consumers tend to buy user-generated products rather than products from designer-driven firms. This preference can be explained by social identification. The fact that consumers are also users and their social identities tend to connect to the user-designers. They feel empowered in the process of being involved in generating designs.

Secondly, after further investigation the authors came to find that the social identification account can predict when the aforementioned effect does not materialize. For instance, it appears that when consumers feel dissimilar to participating users, the effect diminishes. The study has proven that consumers feel dissimilar based on significant demographics (i.e. gender) or when they feel that they do not belong to the social group of participating users (i.e. non-experts). Another case in which the aforementioned effect diminishes is if the user-driven firm decides to be selective in participation. Meaning, the firm does not allow every user to participate in the idea generation process, but just a selective group of users. This can lead to a feeling of isolation or social exclusion for observing consumers.

What I find striking in this research is the fact that observing, non-participating users do prefer user-generated products, while they were never involved in the process. I would understand such an effect if the consumer participated in the process. However, in this case the product designed by the firm itself could be way better since the wishes of the observing consumer were not taken into account at all. Meaning, because the observing consumers know that the products are user-generated they would rather buy that product, because of social identification. During the research they were informed about the production situation and I think they would therefore go for the ideal situation based on social identification. Therefore I cannot help but wonder, would the findings still be the same if the consumer did not know if the product was from a user-driven firm or designer-driven firm?

Source: Dahl, D. W., Fuchs, C., & Schreier, M. (2014). Why and When Consumers Prefer Products of User-Driven Firms: A Social Identification Account.Management Science.