Reducing product uncertainty, new ways of informing buyers?

11

October

2017

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For many customers it is a troubling question: how do I know that the product I’m trying to buy is what the seller says it is? Is the photo taken of the product not just showing the best side of the product while the worse or uglier side is not shown? Will it actually break down as soon as I’ve bought it, will the quality be below what was described on the website? This uncertainty is not just a problem for visitors on websites such as eBay (as described by Dimoka, Hong and Pavlou, (2012)), but also for customers of web shops such as Bol.com to name a Dutch example. How can we reduce product uncertainty as described by Dimoka et. al., (2012)? The authors themselves offered solutions such as detailed descriptions of what you’re trying to buy, or someone else testing and vouching for the product. This works in the case of eBay motors as it might be cost beneficial for larger more expensive products such as cars; however what of smaller products sold by web shops for example? Of course in the case of large shops like Bol.com, the shop has already made a name for itself as one of the largest and reputable web shops in the Netherlands. On top of that through reviews products of worse than expected quality can be identified by customers themselves, smaller web shops on the other hand might not have this reputation and self-selecting customer base leading to lost sales.

Can we not in the future also fix the problem of product uncertainty by introducing new technology, instead of relying on a description of the product by the selling person/company? One of the multimedia tools briefly mentioned by Dimoka et. al., (2012) is Virtual Reality. With the steady rise of Virtual Reality (VR) the world could be turning more and more into us being able to see lifelike things that are not actually there. What if companies scanned in their products and could show them to potential customers through VR, or even a hologram. Currently holograms are quite expensive and mainly used for design or display by other businesses, the Dreamoc 3D for example is going to cost you a neat $1,999. (Realfiction.com, 2017) VR products like the HTC Vive and Oculus Rift on the other hand are getting cheaper; the Vive’s price recently went down by $200, going from $799 to $599. (Kuchera, 2017) What if we in the future could look at any product as if it was right in front of us at home using VR or holograms? These technologies would give customers the best possible description of a product: the one they draw up themselves from being able to visualize the product in front of them. It would not show certain invisible qualities (how long is the product going to last?), but it would give the buyer a better feel for the product in my opinion. In the housing business VR is already used to give potential buyers a better feel for the house they’re looking at. (Vass, 2017) For web shops, technologies like this could also be another step in providing their shoppers more information and a better customer experience.

References:

Dimoka, A., Hong, Y. & Pavlou, P. A. (2012) On Product Uncertainty in Online Markets: Theory and Evidence. MIS Quarterly 36(2) 395-426

Dreamoc HD3. (2017) Retrieved from https://shop.realfiction.com/index.php/dreamoc-hd3-5/dreamoc-hd3.html

Kuchera, B. (2017, August 21) HTC Vive VR headset gets $200 price cut. Retrieved from https://www.polygon.com/2017/8/21/16177270/htc-vive-price-cut-599

Vass, D. (2017, October 3) Reality check: Using VR to sell homes. Retrieved from http://www.builderonline.com/builder-100/marketing-sales/reality-check-using-vr-to-sell-homes_o

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Technology of the Week – From VHS to Streaming – Group 27

29

September

2017

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In this week’s blog we are going to talk about information goods, and specifically the road from VHS to streaming services.

The Video Home System (VHS) was a new technology released in the 70’s that gave the consumer the ability to record video cassettes for later use. This technology meant a drastic change in how television watching worked. This meant that videocassette recorders were a threat to the existing television companies. Adoption went by fast: after 20 years, over 84% owned a VCR in the US (Highbeam Business, 2017).

The DVD (Digital Versatile Disc) has some distinct advantages over VHS: with a DVD you can load every scene whenever you want, rewinding is made much easier, it had a higher storage capacity than the VHS (resulting in higher quality sound and video) and the DVD was much smaller leading to easier storage and production.
The DVD also hit some speed bumps along the way: adoption rate was rather slow, mainly due to its high initial price. Only in 2001 did the DVD actually overtake VHS and become the standard.

However the DVD market could be classified as vulnerable:
• The market was newly easy to enter: new technological advances such as larger bandwidth and faster internet made it easier for streaming markets to serve customers.
• The market was attractive to attack due to a large supply at a lower marginal cost than for which DVDs could be sold.
• The market was difficult to defend due to many companies lacking the vision in using the new internet.

As stated technological advances opened the door for online streaming: accelerated loading speed enabled opportunities for companies to spread streaming media, as well as high adoption of devices to show entertainment on.

Internal opportunities of online streaming would be low marginal cost which is information pricing applying to all of information goods and the media being available on most devices. A weakness is over-dependence of bandwidth and internet. External opportunities are the erosion of the DVD market, a threat is the easy ability of customer to switch to competitors and the ease of illegally downloading.

So what does the future hold? Streaming is becoming more prevalent, especially among younger generations. People want control, which is something DVDs cannot really offer. The downward trend in their popularity will keep up in the future, possibly leading to DVDs becoming just a niche market. Streaming has also impacted the TV industry, cable providers are getting overtaken in subscription numbers in the US (Huddleston, 2017). So what about the streaming industry itself? Market dominance will depend on who can provide a large line up in terms of entertainment, whether that is self-produced or bought. We think the market will keep being dominated by its current leaders such as Netflix and Amazon Prime as they have the offering and infrastructure.

Huddleston, T. (2017, June 15) Netflix Has More U.S. Subscribers Than Cable TV. Retrieved from http://fortune.com/2017/06/15/netflix-more-subscribers-than-cable/

Highbeam Business. (2017) Video Tape Rental. Retrieved from https://business.highbeam.com/industry-reports/personal/video-tape-rental

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CEOs and technology

21

September

2017

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In their article Kane, Palmer, Phillips and Kiron, (2015) discuss their research on how companies react to digital changes. While starting off with an example of a successful ad campaign using technological advances (McDonald’s), they later go into detail as to why many companies do not properly react to new technology and that this is not just about the technologies themselves. Rather it is about ensuring your whole company is ready to use and thrive on these new technologies like McDonald’s. The authors looked at a survey among companies and their employees, trying to find out if companies using different technologies behaved differently. An important finding here is that the management team need to be tech savvy. If the CEO for example is not skilled enough to take advantage of new digital technologies it is likely that the company will not do so at all.

Kane et al., (2015) have a blunt solution for companies: just hire a more tech savvy CEO. Luckily CEOs that are currently less involved technologically do not necessarily have to fear for their jobs. Haggerty, (2012) proposes ways to become more involved with technology, a way for CEOs to change themselves. So how does a manager become tech savvy. Besides taking the BIM master there are of course other things to look at.

The important point for managers according to Haggerty, (2012) is to start involving yourself more in IT. The author lists multiple benefits of this approach however this boils down to one crucial element: become more involved in the technology in your company and industry. You do not necessarily need to understand it all, however talking to the employees who do is crucial to making decisions that also make sense from a technological standpoint. If not the companies’ strategy will falter technologically speaking and a more tech savvy manager will likely be lined up as a replacement.

Managers that currently are not tech savvy should keep this in mind, it is not too late to start working on becoming more technologically involved. The future of your company and your job may depend on it.

Reference list:

Haggerty, N. (2012). On becoming an IT savvy CEO. Retrieved from: https://iveybusinessjournal.com/publication/on-becoming-an-it-savvy-ceo/

Kane, G. C., Palmer, D., Phillips, A. N., and Kiron, D. (2015). Is Your Business Ready for a Digital Future? MIT Sloan Management Review, 56(4), 37

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