SEO Marketing Research

SEO Marketing Research header image 2

Realizing competitive advantage with high-velocity single-production goods

37 Comments · Marketing Research

High-velocity single-production goods, in contrast to high-velocity and medium- to slow-motion co-production goods, imply no high interaction necessity between the firm and the customer.

Of course users have also to specify their special wishes concerning the good, but that is about all they have to contribute. No real interaction takes place.

The time specificity of these goods, however, is very high. The core example of a good fitting into this group of high-velocity single-production goods is news information.

All current pieces of information offered via the web which are topical for only a short period of time for the majority of users fit into this category.

High-velocity single-production goods are experience goods and show singularly good characteristics.

Non-rivalry and information paradox problems are highly relevant with regard to the existing value-creation possibilities.

With regard to the good itself, no high degree of personalization is possible since the good as such (e.g. news information) is not adapted to the customer; however, a specific mix of, for instance, news information could be adapted to the specific customer wants.

These factors are analyzed in the following paragraphs in order to come to optimal positioning options and possible dynamic strategies to realize competitive advantage with high-velocity single-production goods in terms of the theory-based conceptual framework.

The actual high-velocity single-production good itself can be sold because of its high time-specificity.

High-velocity single-production goods only create value in a narrow timeframe. The customer wants to receive accurate information in a timely manner and is willing to pay for that timeliness as well as for the accuracy.

Hence, the main source of income generation can be the good itself. Even though the high-velocity single-production goods show non-rivalry good characteristics and can be copied easily, attractiveness of redistribution via third channels is decreased since it takes time to coordinate the redistribution.

One problem that has to be solved to actually sell high-velocity single-production goods is the so-called information paradox: customers with regard to information do not want to pay before knowing the information, but after knowing the information they are not willing to pay for it any more.

This problem can only be solved when the information provider sends out credible signals that make the customers believe in the quality of the information.

Such signals are credible when a provider of high-velocity single-production goods has already established a reputation is established, the information pieces can be sold.

Traditional selling can be used as the main source of income. Innovative marketing can be used as a complementary source of income.

However, the user of such time-specific information usually wants to get quick access to relevant information and not to be swamped with advertisements.

Besides, the reputation as a provider of high-quality information might be damaged when too many advertisements occur on the websites of a high-velocity single-production good provider.

A broad market focus is possible, such as selected by Reuters in the area of providing high-velocity single-production goods on a global basis, as well as a narrow focus on a country level.

The major influences on these options for high-velocity single-production good providers have to be analyzed in terms of the PEST analysis.

If a high-velocity single-production good provider selects a broad focus, political and legal forces play a major role because it becomes more complex to handle them on a global basis.

For instance, it is relevant to adapt the revenue model to taxation laws in the different served markets.

The environment here shows especially dynamic features that have to be taken into account by remaining a flexible organization.

These tasks are easier to manage for high-velocity single-production good providers focusing on a narrow market segment.

Socio-economic factors are especially relevant for high-velocity single-production good providers that focus on a narrow market segment.

These firms mainly create value by adapting to cultural, language and country specificities of particular markets.

In terms of technical factors, since the main source of income generation is traditional selling it is especially relevant to find accepted secure methods of payment.

This task is again more complex when a broad market is selected. However, since customers often need timely information on a regular basis, subscription models can be selected that make it possible to charge customers on a monthly basis using traditional standing orders.

The Internet could theoretically be the only distribution channel for high-velocity single-production goods, but usually it is an additional channel since in this business reputation is highly important and has already being built by traditional providers of high-velocity single-production goods in channels other than the Internet.

However, the additional-channel Internet becomes more and more dominant in this area because of the clear advantages of the Internet to deliver time-specific single-production goods without distance barriers all over the world, or to particular market segments, in a very efficient manner.

For the customers the good is relevant in terms of it being crucial that they can rely on receiving required information in a timely manner and accurately.

This is also the reason for the high relevance of reputation in this business, which is at first hard to establish by new entrants.

In terms of the developed generic positioning options for intangible web-good providers, for high-velocity single-production good providers broad as well as focused positions are especially appropriate that are based on complementary traditional selling.

The hatched fields in the matrix show complementary options with regard to additional use of innovative marketing as a source of income generation in addition to traditional selling.

However, high-velocity single-production good providers have to be careful not to spoil their reputation as a serious information provider by placing too many advertisements on their sites.

The analysis makes it obvious that it is possible to earn revenue with the high-velocity single-production good itself.

Building on that, it now has to be analyzed how a firm providing such a good can realize competitive advantages relative to its competitors.

In a first step the relevant competitive forces that influence the market attractiveness for intangible web-good providers have to be taken into account to generate insights into possible dynamic strategies for high-velocity single-production good providers.

In this context it is acknowledged that only after analyzing firm-external and firm-internal factors can statements about opportunities to realize competitive advantages be made.

The business environment for this group is a relatively attractive area of intangible web-good provision for firms which were already active in this business area before the Internet age.

Such firms have already established a reputation in the area of providing qualitative high-velocity single-production goods via traditional channels.

The bargaining power of suppliers is relatively high when crucial content providers are not integrated into the firm.

Nevertheless, often these content providers are internal resources of a high-velocity single-production good provider.

In addition, the reputation of the high-velocity single-production good provider is the relevant resource with regard to selling the information.

Thus, even when the content providers are not integrated in the firm they are dependent on the reputation of the high-velocity single-production good provider.

Value can be created when an information provider uses the Internet as a distribution channel, since time specificity can be better handled via this medium.

The only critical force in terms of supplier power is to be seen in valuable employees who provide the relevant underlying technical basis that is crucial for success.

However, such human resources in the technical areas of the web are increasingly regarded as commodities.

Employees responsible for the content creation are regarded less as commodities. In addition, such human resources are mobile and thus can be wooed away by competitors.

However, because reputation is the really valuable resource in this business, high-velocity single-production good providers with a strong reputation attract valuable content contributors.

Working for a high-velocity single-production good provider with a strong reputation increases the career opportunities and motivates content contributors to stay in the firm for longer periods.

Entry barriers that protect firms that have already established themselves as high-velocity single-production rood providers are relatively high, since in this business it is crucial to have a reputation its it trustworthy information provider.

This reputation can only be built over time and thus is highly path dependent. A new competitor in such businesses from the start cannot achieve such a reputation.

Firms that already have built a strong reputation with regard to providing high-velocity single-production goods outside the web are easily able to become successful on the Internet.

Hence, this business segment is attractive for firms already competing in the equivalent offline area.

For completely new firms it is very difficult to enter the business successfully. Established providers such as Reuters have already built a reputation that developed on a specific path over many years, creating value for customers, and thus is difficult to imitate.

Reuters provides access to topical content on the Internet in a proprietary form and is it a rather attractive position in this area owing to building on the firm tradition as an information deliverer.

The firm is successful on the Internet because of its reputation as a provider of valuable high-velocity single-production goods in the form of access to topical proprietary content”

Because of the information paradox, reputation is a necessary basis of success in the area of high-velocity single-production good provision.

For the customer, theoretically it is easy to switch from one online news provider to another.

Nonetheless, since the reputation of the provider plays a dominant role, this can prevent customers from switching and thereby smooth their bargaining power.

Besided, users often subscribe to a certain news provider for a specific time and are thus contractually bound to that provider for a while.

In addition, usually there are not too many incumbents with a strong reputation in such businesses to which users could switch.

Advertisers do not play a dominant role with regard to high-velocity single-production good provision and thus also do not have high bargaining power with regard to firms doing business in this area.

Intermediaries, in the form of firms that engage in combining different information segments in a way that is customized for particular customers, have gained relevance.

These intermediaries are becoming more relevant since many users have difficulty in managing the growing information flood of the Internet.

Examples of firms active in this area are so-called clipping services such as Cyberscan or eMedia Worldwide.

These services collect information about selected topics for paying users. These intermediaries, yet, are not a danger to high-velocity single-production good providers but lead to an increase in selling of their goods.

In addition, it is conceivable that the high-velocity single-production good providers may themselves engage in this supplementary intermediary business.

No real danger can be seen from substitutes because, with regard to the time specificity, clear advantages of the Internet properties can be observed.

Moreover, all firms traditionally providing high-velocity single-production goods should make use of the Internet or might fail in the long run.

Complementary products or services do not play a dominant role as competitive forces lot- high-velocity single-production goods.

Rather, high-velocity single-production good providers can profit from complementarities between their online and offline businesses.

The degree of rivalry between firms of this group that are already established in this business is relatively high since customer switching costs are low and competition in the news area is global.

It is smoothed to a degree because of the high relevance of reputation, in terms of leading to competition between a small number of firms that have established reputations in the field.

From the above reasoning it becomes obvious that it is possible but difficult to elect isolating mechanisms to gain competitive advantages with high-velocity single-production goods when newly entering this business because the most promising areas here lie in the establishment of reputation.

Reputation develops over time. It is thus path dependent, has to be built and cannot be bought.

Reputation is a possible source of competitive advantage, since it enables differentiation of the good in the eyes of the customers.

Established providers of information goods in traditional markets can out, compete new entrants on the Internet.

If reputation as a trustworthy provider of high-velocity single-production goods has been established, a valuable resource has’ been developed that is imperfectly mobile as well as difficult to imitate because of path dependency.

Switching costs of customers are not as high in such a case, because economic switching barriers are not existent to a high degree.

Nonetheless, since not many providers possess the valuable resource of reputation, the switching options for customers are limited. Reputation here is also relevant in terms of attracting high-quality employees.

Taking these features together, dynamic strategies possible for high-velocity single-production good providers can be derived.

It is possible to develop difficult-to-imitate resources and capabilities that are firm-specific (reputation).

The dominant strategies to achieve competitive advantages are thus to stay comfortable with regard to already established reputation but always to adjust this valuable resource to market developments in terms of continually fostering reputation in highly competitive, often global markets. Highlights these insights in gray.
 

Tags:

37 Comments so far ↓

Leave a Comment