Learning to let go: How to deliver value when you’ve lost control of the product
Service networks that support the exchange of goods between producers and consumers are increasingly turning to the unique affordances of technology to address challenges associated with changing market conventions. These challenges include the need to provide personal experience despite the lack of physical storefronts, the ability to supply niche products to a global community, and consumers’ growing concern with supporting unsustainable practices associated with traditional models of manufacturing and consumption.
The way organizations deliver viable and desirable services depends on the resulting network’s ability to set user expectations and deliver value through fulfillment. This model is a characteristic of successful economic networks, but technological interventions that extend that network to support peer-to-peer exchanges over distances, without dace-to-face interaction and without the ability to control the quality of goods exchanged, pose new challenges. The solutions to these challenges will require that networks can sustain culture and build trust among participants who use them. These two needs emerge with shifting economic models that engender market trends as technology increasingly shapes the lives of consumers.
One such trend is the viability of large suppliers that sell products to users without a physical storefront. These suppliers reply on digital interfaces to support communication and transactions. The suppliers, such as Amazon, Zappos and the Gilt Groupe, replicate the human-to-human transaction in the form of carefully crafted presentation, tone and access. Zappos, the expanding online shoe retailer pioneered by Tony Hsieh, is known for its outstanding service and customer interaction. These touch points are integrated across multiple digital channels including steaming video, Twitter, blogs, and partnerships with Facebook and youTube. The cost of maintaining these digital channels runs the billion-dollar company about $300,000 a year, but Hsieh claims that the company doesn’t assign investment metrics to measure return. The benefit is ultimately for the customers—not the company. “It’s really just about our unwavering belief that making the customer happier is going to win in the long run,” he says (Steinert-Threlkeld 2009). The company’s immeasurable return is the customers’ perception that Zappos employs happy individuals you’d want to know better. By creating the opportunity for users to forge personal emotional connections to their retailer, Zappos has nurtured a model that addresses the challenge of delivering humanistic service via a large-scale online retail network.
Amazon is another online retailer without a physical storefront that lets users connect with the product supplier through technological affordances. Advanced algorithms power a recommendation engine that adds value to user experience by suggesting related items based on past purchases. The user interface welcomes logged-in users by name, and supports the creation of wish lists. These features simulate the personal experience of walking into a small shop where the owners remember your name and know what you likely need before you even ask.
Gilt Groupe, a retail startup offering discounts on name-brand apparel, furnishings and luxury getaways, has taken a different approach to simulating personal interaction despite its lack of a physical location. During its startup phase in 2007, users had to receive a referral from a friend to gain access to their deals. Gilt essentially “offshored” their human face by restricting access to people with trusted friends and acquaintances who had already recommended the company. The digital experience began with a human connection.
Another economic trend that exploits technology’s ability to move capital and products farther and faster than before is consumers’ understanding that traditional patterns of consumption are unsustainable. Rachel Botsman and Roo Rogers, in their book Collaborative Consumption, describe this value shift as “a growing consumer consciousness that finite growth and consumption based on infinite resources is not a viable combination.” We have witnessed a proliferation of sites that facilitate the exchange of second-hand goods. Pioneers in the market include Ebay and Craigslist, but newcomers supplying niche markets are cropping up such as Toyswap, Freecycle and Zilok. New networks that connect producers and consumers of recycled goods have to address the unique challenge of delivering value despite their inability to control quality of the actual product.
The last trend we will examine in connection with the question of how to maintain a viable network of producers and consumers connected through digital interfaces addresses the rise of niche markets supplied by the highly focused sites previously mentioned. We are moving toward an interconnected globally market where niche products are accessible and even desirable. Moreover, the products in these markets are supplied and demanded by people, rather than organizations. This is where the importance of setting user expectations and implementing mechanisms to establish trust between participants is paramount to sustaining a network of independently operating producers and consumers. Ebay set conventions in this market sector, assigning star ratings to power sellers and placing heavy emphasis on leaving feedback for outstanding transactions.
Thus, in order for service providers to foster a viable and desirable network in this new economy characterized by ecologically-minded consumers buying directly from other individuals through digital interfaces, the network must deliver value in parallel parts: They must document the emerging community culture and transmit that identity back to participants, and they must make visible the security of transactions to establish trust.
Etsy, a network of crafters, artists and vintage suppliers, has extended their efforts to document emerging culture beyond the digital medium. Understanding the needs of the niche market they serve, they have hosted craft workshops and hosted live chats about the creative process and crafting techniques. By facilitating the exchange of information in addition to the exchange of products, Etsy has increased its value as a network connecting producers in a knowledge economy. New users of Etsy benefit from the rich documentation of culture surrounding the online community, and Etsy benefits from a solid identity based on documentation of past precedents.
Moving beyond the exchange of products to the exchange of services, the success of digital networks like AirBnb is moored to the documentation of emerging culture surrounding their offering. AirBnb, recently named on of the most innovative companies by Fast Company, connects people with extra space in their home or apartment to travelers seeking more affordable or alternative places to stay in their destination city. The company sets user expectations by collecting testimonials on their website and running rich media ad campaigns on Google (Heussner, 2011). Providing transparency of the AirBrb culture allows new users to internalize and understand what the service promises to deliver, and puts the network in a position to fulfill that promise.
The second need that robust networks supporting peer exchange must fulfill is a visible indication of security. Building a secure network fosters trust between participants and encourages commerce over digital channels. Trust can be established through both technical and social means. Technical implementations include conducting financial transactions over a secure socket layer that encrypts credit card information, integrating conventional iconography and payment flows into the user interface, and providing adequate feedback to users so they know when the transaction is complete and what to expect in the future.
Additionally, peer-to-peer networks can foster community-supported trust mechanisms such as encouraging user rankings and hosting individual user profiles. These features establish sellers’ credibility and hold users accountable for their listings. Traditional economic models usually involve a middleman who ensures transactions are honest and the product is of quality. However, networks that remove the middleman have a unique responsibility to replace the element of anonymity in Internet transactions with an element of familiarity that resembles a face-to-face exchange between trusting individuals (Botsman 2011).
By setting user expectations through documented culture and building trust mechanisms into a complex peer-to-peer network, service providers can build a valuable and viable business model that capitalizes on emerging trends in a digitizing economy. Networks that focus on the triple bottom line (economic, ecological and social) have the potential deliver robust solutions that connect a global niche market efficiently and meaningfully, provide value to users who want to break free from unsustainable practices of consumption and production, and control the quality of their service despite their inability to control the physical production and quality of products exchanged on their platform.