CREATING CUSTOMER VALUE THROUGH SOCIAL COMMERCE

• • • • • • • • • • • • The world around us Emerging Business Models Transformation of value creation Value chain Network Linear to networked value chain Smile curve Locus of value Crowd sourcing The world is flat for online markets S curve and J curve

WORLD AROUND US IS CHANGING

Determinants of Customer Delivered Value
Image value Personnel value Services value Total customer value

Product value
Monetary cost Time cost

Customer delivered value

Energy cost
Psychic cost

Total customer cost

4

VALUE CHAIN

Porter’s “Business Value Chain”
Firm infrastructure Supporting Activities HR Management

R&D
Procurement

Operations

Marketing and Sales

Outbound Logistics

Inbound Logistics

Primary Activities

“A process can be seen as a ‘value chain’. By its contribution to the creation or delivery of a product or service, each step in a process should add value to the preceding steps.” Rummler and Brache, Improving Performance

Service

Products/ Services

The Birth of the Supply Chain
Firm infrastructure HR Management R&D Firm infrastructure HR Management R&D Firm infrastructure HR Management R&D

Procurement
Operations Operations Marketing and Sales Outbound Logistics

Procurement
Operations Marketing and Sales Outbound Logistics

Procurement
Marketing and Sales Outbound Logistics

Inbound Logistics

Inbound Logistics

Service

Service

Inbound Logistics

Supplier Value Chain

Enterprise Value Chain

Customer Value Chain

•Adding Business Value Chains together creates a Supply Chain! •Supply Chains are important because they allow organizations to optimize their processes over their Suppliers and improve service to their Customers! (Inter-enterprise processes)

Service

Extending the Value Chain we are here
Firm infrastructure HR Management R&D Procurement Firm infrastructure HR Management R&D Procurement Firm infrastructure HR Management R&D Procurement Firm infrastructure HR Management R&D Procurement Firm infrastructure HR Management R&D Procurement

Operations

Operations

Operations

Operations

Operations

Outbound Logistics

Outbound Logistics

Outbound Logistics

Outbound Logistics

Marketing and Sales

Marketing and Sales

Marketing and Sales

Marketing and Sales

Outbound Logistics

Marketing and Sales

Inbound Logistics

Inbound Logistics

Inbound Logistics

Inbound Logistics

Inbound Logistics

Service

Service

Service

Service

Supplier-1

Supplier

Enterprise

Customer

Customer+1

“In the future, organizations are going to have to worry about how their processes fit within their business partners business processes” Rose Heinz, Enterprise Architect TG

Service

Value chain of knowledge management

(Hilse, 2000)

Permanent questions for Business

How will we Create value?

How will we How will we Deliver value? Capture value?

FROWN CURVE

TRANSFORMATION OF VALUE CREATION

A smile is a curve that sets everything straight
Added Value

R&D/Innovation Centre
Standardisation

Global Logistics Center
Higher Added-value and Lower Replacement

Brand

Innovation

Marketing
R&D Design Manufacture Assembly

Value Creation
Logistics

Value-added process

Value Chain Evolution
Costly info and coordination integrates value activities – most economical way to produce Inputs, Manufacturing, Marketing, Distribution, Retail

Cheap information disintegrates value chains, because segment consolidators realize specialization gains and economies of scope – integrated production becomes costly Inputs Manufacturer Marketer Distributor Retailer

Cheap coordination atomizes disintegrated value chains and explodes value activities within layers, because microproducers realize distributed scale economies

Peers Platform Peers Aggregator

Peers

Value Chains & Value Appropriation
In atomized value chains, industry profitability will migrate to the edges 40% 20% 40%

Platform

Peers

Aggregator

35%

10%

10%

10%

35%

Inputs

Platform

Peers

Aggregator

Reconstructor

Why? Market power in atomized landscapes is a function of relative scale: the edges can realize the greatest relative economies of scale via demand and supply side network FX. The middle of the value chain explodes and can’t realize scale economies. Core competences for disintegrated value chain coordinators become core rigidities – value capture requires competences at both edges of the chain

The Explosion of the Middle
In atomized value chains, industry profitability will migrate to the edges

40%

20% Peers Peers

40%

Platform

Aggregator Peers

Peers
Why? The center explodes and atomizes – hypercommoditization – and value shifts to adjacent segments, because they can realize scale economies from the exploded center’s output.

Examples:

Value Appropriation Examples
In atomized value chains, industry profitability will migrate to newer (and newer) edges 35% 10% 5% 10% 35%

Coordination

Production

Publishing

Aggregation

Filtering

Platform

Peers

Publisher

Aggregator

Reconstructor

Laptop audio

Artist

Label

Club

DJ

Blogger

bloggers

hosting

search

Bloglines

MMOG Developer

gamers

Mods & plugins

Community sites

Gaming Open Market

VALUE APPROPRIATION AT THE EDGES NEW SERVICES AND BRAND DEVELOPMENT

N E W S E R V I C E S

B R A N D D E V E L O P M E N T

Emerging Business Models

LINEAR TO EXTENDED VALUE CHAIN

Extended Enterprise Models

23

NASDAQ Extended Enterprise

24

LINEAR TO NETWORKED VALUE CHAIN

The Value-Adds Versus Costs of Different Channels

15-36

Metcalf’s Law works something like this: as the number of users connected to a network system grows, the value of that system begins to increase at a square of the number of users

Social commerce

e-Commerce

Social Commerce

Social Media

39

Twitter wants to emphasize e-commerce going forward
• FEE for transactions that originate on the site. • Many companies currently use Twitter as part of their customer service, watching for mentions of their company name. • Angry tweets are opportunities to solve a problem; and tweets that praise the company are recognized by the brand, ultimately gaining them an advocate.

PINTEREST
• Pinterest is the other notable social commerce platform, where images or videos are curated by users. • Pinterest is a marketer’s dream, as these images can link back to the originating product page.

Community Marketplaces
• Powerhouses like eBay, Amazon, and Etsy specialize in consumer to consumer sales, but also feature B2C sales. • These sites encourage sharing, user reviews, public wish lists, and other forms of social sharing, turning purchases into a personal endorsement.

User Generated Reviews
• Sites like Amazon, Yelp, and Foodspotting rely heavily on user reviews to create a rating system for products and establishments. • By leaving their ratings, reviewers can earn rankings or badges, while directly influencing sales for the products or establishments being reviewed. • Half of people aged 18–34 rely on user generated content to make a decision purchase, and 83% of consumers rely on user generated content to make a decision about financial services.

Crowdfunding
• Through sites like Kickstarter or IndieGoGo, consumers can directly fund the products or projects that they want to see created. • Generally, higher level donations receive some sort of bonus for their help. • Kickstarter projects must reach 100% of their goal to fund the creators, while IndieGoGo gives money to the creator projects even the project doesn’t reach it’s goal. • New sites such as Flattr, Patreon, and Tugboat Yards allow fans to pledge or sponsor their favorite creators via micropayments. • This allows creators supplementary income in exchange for their podcasts, videos, or music.

Group Purchasing
• Sites such as Groupon and Living Social were huge a few years ago, but have been on the decline recently. These sites offer reduced prices on products or packages if a certain number of users agree to buy the package being offered. These group purchasing sites has had a difficult time turning a long-term profit, so their future remains in doubt for now.

Crowd sourcing Crowd sourcing product design

Locus of value

Customer engagement

THE WORLD IS FLAT FOR ONLINE MARKETS

BUSINESS EXCHANGES
• • • • • • B2B B2C P2P C2C G2C E 2E

QUANTAM MARKETING

LOCK TO CUSTOMER MOMENTS

Market Research and Strategy in Social Networks
• Social networking merchants can easily find their customers and see what they do online and who their friends are. • Companies generate faster and cheaper results than traditional focus groups.

Source: Turban et al. (2010), Introduction to Electronic Commerce

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Tools to Monitor Social Media
• NetBase • SPSS Modeler- measures trends analyzes emoticons and texting slang terms

7-66

MARKET RESEARCH FOR SOCIAL COMMERCE
• The maturation of online social commerce has opened the door to a new type of market research. • This new form is rooted in the fluid world of social engagement, where customer product experience proves as challenging to MR as the transition from telephone to online. • Coupling online measurement and rich user generated content challenges our notions of predictive analytics and the power of narratives. • Embracing semantically empowered tools and behavioral metrics in a social commerce environment promises business insights that more easily connect with the rapidly changing world of contemporary commerce.

TILL WE MEET AGAIN

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