Customer Network Paradigm PDF

s. 19-40 Customers (6) From To Customers as mass market (one-size fits all, Customers as dynamic network (customized volume selling, broad targeting) products, real time interactions, adaptability) Communication: broadcast (target as...

s. 19-40 Customers (6) From To Customers as mass market (one-size fits all, Customers as dynamic network (customized volume selling, broad targeting) products, real time interactions, adaptability) Communication: broadcast (target as many Communication: two-way (social media, as possible, same message on tv, radio) livebots, collaboration (surveys), personalized messaging) Firm is the key influencer Customers are the key influencer Marketing to persuade purchase Marketing to inspire purchase, loyalty, advocacy Value: only one way Value: both ways Economies of firm scale: when productions Economies of customer value: advantages increases (lower costs, bulk discount, market firm gets when enhancing value to customer power with suppliers) (loyalty, they pay more, sharing customers) - The Customer Network Paradigm o companies try finding the product or service that will suit the needs of as many potential customers as possible o Media promotes a company’s offerings to as many customers as possible. The Marketing Funnel/ impact in the Marketing Funnel - Progression of psychological states o awareness: existence – consideration: value – preference – action - loyalty o Through tv, coupon, reward programs o -> Advocacy through photos & reviews - You understand how customer network impacts greatly on business – customer relationship - Better to invest in existing customers than attempting to get new ones Consumer Networks Behavior and Customer Strategies S. 46-59: Organizational Challenges of Customer Networks - Enabling the Network Inside (own employees) ▪ access their work more easily and flexibly ▪ engage with the right content, information, and resources ▪ customize their workflow around flexible travel, roles, and schedules ▪ connect with each other—to share knowledge ▪ collaborate using tools that allow them to share projects - Adding New Skills and Replacing Old Habits ▪ social media and community management, journalistic content creation, new media buying and measurement, e-commerce ▪ avoid outsourcing - Bridging Silos ▪ improving communication and collaboration between isolated teams or departments within an organization to enhance efficiency and alignment Competition From To Competition: defined industries (similar Competition: fluid industries products, pricing pressure, innovation) (changing/evolving, new challengers, innovation)  Clear difference with partners and rivals Blurred difference between partners and (either collaborates or competes) rivals: (collabs, shared goals) Competition: zero-sum game (only 1 party Competition: cooperate in key areas (shared wins, other must lose) resources, mutual benefits) Key assets: held inside the firm (data, patent, Key assets: outside networks (partnerships, trademark) suppliers, customers) Products with unique features and benefits Platforms with partners who exchange value: collaboration/ data A few dominant competitors Winner-takes-all due to network effects. E.g. Airbnb -> less competition Definition of Platforms - A platform is a business that creates value by facilitating direct interactions between two or more distinct types of customers. - Hagiu and Wright - Distinct types of customers o must serve two or more distinct sides o e.g., buyers and sellers - Facilitating o must take place through it and be facilitated by it Types of platforms Pre-digital example Digital example Exchange Shopping mall, real estate Ebay, Etsy, Airbnb, Uber Transaction Credit & Debit cards PayPal, Bitcoin Ad-supported media Newspaper, tv Websites, social media Hardware/software Videocassettes VHS Xbox, iOS, Android S. 64-71: Competitive Benefits of Platforms - Light in Assets o Both capital and operating costs are low bc. Low physical assets o few employees o can achieve extremely high operating margins on a percentage basis o Ex. Alibaba - Scaling Fast o grow extremely quickly o low operating costs, combined with a scalable cloud computing architecture o slow employee growth  o Ex. Airbnb - Winner Takes All o hard to launch a direct challenger o Customers sign up for a site that has acceptance or many other users. o Ex. Google o likely to happen when ▪ Multihoming: using different platforms to same thing (Wolt and foodora) ▪ Indirect network effects: More sellers on eBay attract more buyers ▪ Feature differentiation is low: Platforms offer similar features, making it easy to switch e.g., Spotify -> apple music o monopoly behavior restricts competition and often leads to higher prices and fewer options for consumers o slightly different categories - real threat - develop a similar search - Economic Efficiency o enable the efficient usage of distributed pockets ▪ bring together lone actors ▪ Ex. Etsy, Uber (freelance economy), Airbnb (rental economy) o None of these roles would be possible without platforms. o individual actor would never have the resources to find the right matching project, need, or customer. S. 89-106: Data From To Data is expensive Data is always collected everywhere Challenging to store and manage data Challenging to turn it into valuable info Can only use structured data Unstructured data is more usable and valuable Managed in operational silos (only used in Connecting it across silos (used and shared some departments) between departments) Tool for optimizing processes Key intangible asset for value creation Why Data Strategy - understand and precisely reach the right audience. - Maps service, Google o Apple chose to remove Google Maps as the default mapping app o Fucked up -> apology - understanding what data, you need as well as how you will apply it. Principles guiding organizations in developing their data strategy 1. Gather diverse data types:  o supply chain, internal billing, and human resources management o Product or service data is essential to the core value of your products or services. o transaction data, to customer surveys, to reviews and comments in social media, to customer search behavior and browsing patterns on your website 2. Use data in decision making: o data to make better-informed decisions o Operations data to plan for and optimize the use of your resources o changes in your services or communications may yield improved results. 3. Apply data to new product innovation: o imagining and testing new product innovations 4. Watch what customers do, not what they say: o Behavioral data: actions of your customers ▪ transactions, online searches ▪ clickstream data ▪ Behavioral data is always the best customer data 5. Combine data across silos: o combine your previously separate sets of data and see how they relate to each other. What is Big Data/ trends - Rapid growth of new types of unstructured data and the rapid development of new capabilities for managing and making sense of this kind of data for the first time. - Source: social media, Siri - Brands monitor their reputation over time based on what customers are saying - location data o customers with similar location likely to buy similar products Where do Organizations Find the Data Needed - customer data exchanges, lead users, supply chain partners, public data sets, and purchase or exchange agreements. S. 123-134: Innovation (6) From To Decisions made based on intuition and Decisions made based on testing and experience validating Testing ideas: expensive, slow, difficult Testing ideas: cheap, fast, easy Experiments: infrequently by experts Experiments: constantly by everyone Innovation challenge: find the right solution Innovation challenge: solve the right problem Failure is avoided Failure is a learning, early and cheaply  Focus is the finished product Focus is on prototypes and iterations after launch What is Experimentation - learning about customers, markets, and possible options that will lead you to the right solution. - Failure is learning - They seek to increase learning by testing ideas and seeing what works and what doesn't. Two types (divergent, convergent) of Experiments and why you need both. And why Digital is impacting both. Convergent Divergent Ex. A/B testing Giving prototypes to customers Formal experimental Informal experimental Asks a precise question Poses unknown questions Seeks one answer Seeks multiple answers Testing actual product Testing prototypes Seeking validation and optimization Idea generation Late stages Early stages In common: - Increase knowledge - Tests assumptions - Looks outside for answers − Convergent experimentation is becoming increasingly powerful and affordable due to new technologies. − mobile or wearable devices to push the promotion digitally to consumers, − physical product offerings, both 3D printing and computer simulations − able to run more experiments – cheaply and quickly S. 165-180: Value (5) From To Defined by industry Defined by changing customer needs Execute your current value proposition Uncover next opportunity for customer value  Optimize business model as long as possible Evolve before you must, stay ahead Judge change how it impacts current business Judge change how it creates next business (new products, trends) When successful you might avoid threats and “Only the paranoid survives” stop improving and innovating The model “Three Routes Out of a Shrinking Market” - New Customers (Same Value) o find new customers to buy the same offering. o creative thinking o -limits, though, to how many new customers can be found - New Value (Same Customers) o continue serving your same customers o adapt your value proposition to stay relevant to their changing needs. o willing to depart from what has brought it success in the past. - New Value + New Customers o adapting and extending the value of your offering is what will lead you into new markets o In sum, for any business in a shrinking market, focusing on adapting its value proposition to provide new relevance to customers is essential. Five Concepts of Market Value Concept pro con Examples Product Helps decide what to Might ignore what SUV invest in. the customer really wants Customer Customer-centric, people Not focused on value Targeting ads to who buy it. and quality parents with small kids Use case Value- and customer Customer may have Night out with centric, Different multiple uses for it friends situations where customers use your product Job to be done Value centric and Lacks clear details Safely & comfortably customer centric, the transport kids from a problem you are solving to b Value Value centric and - Reliable proposition customer centric, what transportation, room makes your offer unique for several riders S. 188-202: What are the Organizational Challenges of Adapting the Value Proposition? = What are the challenges organizations face when changing their value proposition? - Take the point of view of the customer - Dedicating Leadership o Who will be in charge of making the change happen? - Allocating Talent and Treasure o Often, adapting a business value proposition requires changing the lines of reporting of existing employees. - Avoiding Myopia o Bold new opportunities o Avoiding myopia requires a business to take the customer's point of view rather than its own. o institutionalize listening to its own customers o Challenge yourself ▪ Not about finding the right customers to listen to but keeping our ears open Definition of Disruption according to Rogers - Business disruption happens when an existing industry faces a challenger that offers far greater value to the customer in a way that existing firms cannot compete with directly. o Existing industry ▪ For something to be disruptive, something else must be disrupted o Offers far greater value to the customer: ▪ new offering is suddenly much more attractive to customers than the offering that the existing industry provides. o Cannot compete with directly: ▪ It meets the customer’s needs with a product, service, or business model that the existing industry does not, and cannot, offer - = extremely innovative. The theories of Schumpeter and Christensen - Schumpeter. o creative destruction, ▪ Capitalism inherently destroys old industries and economic systems in the process of innovating new ones. o destroying their predecessors - Christensen o how disruption happens o starts out selling to buyers in a new market, buyers who are outside the market o offers an innovative product, cheaper, accessible o becomes good enough to be a viable alternative for the incumbents own customers o based on examples drawn from buying decisions made by businesses, not consumers. o disruption that is driven by consumer purchase behaviors