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Realizing competitive advantage with medium- to slow-motion co-production goods

29 Comments · Marketing Research

Medium-to slow-motion co-production goods call for the necessity to include an “external factor.”

Interaction between provider and user here takes place in an extensive dimension. Compared to high-velocity co-production goods, these goods arc not time specific to a high degree, but are valuable over a certain time period that may differ from medium to very long.

For example, interaction between users in an online discussion forum is of medium time specificity (even if it is not relevant to transfer data and thus of immediate importance, it has to be done within a specific timeframe to be valuable for the users).

The contents of an elevating area on history, on the other hand, can be described as implying time specificity only in the long run.

Other examples that fit into the category of medium- to slow-motion co-production goods are discussion groups, community forums or e-consultancy possibilities with regard, for example, to legal or medical advice.

Medium- to slow-motion co-production goods are characterized by a high relevance of storability and individuality.

They have a high potential to create value for the provider and user by being individualized and thus customized for a specific customer (i.e. transmutability is highly relevant).

Further features of intangible web goods belonging to this category are high extents of experience good characteristics and of network good characteristics.

The digital form in this case leads to immense new value-creation potential. Problems of non-rivalry do exist with regard to selling these intangible web goods.

Even though the actual good that lies in enabling the interaction cannot be copied, the results of the accompanying interactions can be copied and be valuable for others.

This situation makes it difficult to sell actual medium- to slow-motion co-production goods, since storability is possible, time specificity is not given and the results of the interactions may be valuable for third parties.

Further, medium- to slow-motion co-production goods have features less appropriate to be sold since they are often less essential with regard to their functionality for the user.

For example, taking part in an online discussion group is often seen as pure fun, while using an e-stockbroking platform implies more important functionalities for the user.

Therefore, the main source of income for slow-motion co-production goods often cannot be the intangible web good alone.

Instead of that, value creation often has to be based on innovative marketing. As well as to this main source of income generation it is conceivable to sell certain individualized features of the intangible web good.

For instance, a medium- to slow-motion co-production good provider can charge a customer for certain functionalities of an e-learning forum and thereby generate additional income in addition to the income generated through innovative marketing.

Because of the high degree of interaction between the provider and the customers for medium- to slow-motion co-production goods, a rather narrow area of activity in terms of the market focus seems appropriate.

In terms of the PEST analysis socio-economic factors in particular are of relevance. This is the case because the kind of interaction has to be adapted to specific markets in terms of language.

Here, it is not sufficient just to undertake minor modifications with regard to the language, as the interaction process leads to completely different intangible web goods in different language zones that evolve over time on different paths.

Interaction between customers and other customers, or between customers and the intangible web-good provider, usually has to be undertaken in the language of the customer to lead to value generation.

Further, if such medium- to slow-motion co-production goods are used as a basis to gain customer data (which is a relevant option, since the customers actively shape the good and thus show their inherent attitudes to be used for marketing purposes), usually the customer group to be researched has to be easily attributed to a specific market.

In this context it is, for instance, relevant to be informed about levels of consumerism, demographic forces and income distribution.

Technological factors and determinants from the PEST analysis have to be considered with regard to existing network effects of medium- to slow-motion co-production goods.

Medium- to slow-motion co-production good providers in a field characterized by direct network effects can only be successful when they attract a critical customer base in the selected market segment.

A community forum of a specific interest group in the web, for example, is only attractive when enough users meet in the forum and initiate a value-creating interaction process.

With many participants actively contributing to such a forum the possibilities to gain revenue with innovative marketing do increase.

Medium- to slow-motion co-production good providers can select the Internet as an additional or as the only channel of distribution.

Because of the fact that the good itself is not sold but the Internet is mostly used as a marketing platform, often the Internet is seen as an additional channel to traditional channels to place advertisements or attain more specific customer data.

In terms of the developed generic positioning options for intangible web-good providers, for medium-to slow-motion co-production good providers focused positions are especially appropriate that are based on complementary or sometimes also isolated innovative marketing.

Focused complementary or isolated innovative marketing can, however, be augmented by selling particular features or functionalities.

The business environment for this group of firms shows less attractive features than can be found in the area of high-velocity co-production good provision.

The bargaining power of suppliers, though, is also relatively low here since no content or software or similar intangible web good is provided in this group.

The main feature of the intangible web good provided here is to enable a “customer to customer” or “customer to firm” interaction via the web.

The only critical force in terms of supplier power could be valuable employees that might be crucial for success.

These human resources are mobile and thus could potentially be wooed away by competitors.

The complexity of medium to slow-motion co-production goods is usually lower than the complexity of high-velocity co-production goods, since no time specific transactions and or interaction are to be enabled and in most cases no money transfer is implied.

This leads to the consequence that single human resources in the form of individual employees (as opposed to human resources teams) are often able to contribute substantially to value generation with regard to these goods.

Hence, it can be a real danger to the success of medium- to slow-motion co-production good providers if certain employees leave the firm, thereby leading to decreasing performance of a medium- to slow-motion co-production good such as an e-learning platform.

The bargaining power of possible intermediaries does not play a crucial role with regard to the opportunities to realize revenue with medium- to slow-motion co-production goods.

Entry barriers that protect firms that have already established themselves as medium- to slow-motion co-production good providers are moderately high since direct network effects characterize these goods.

If direct network effects are present, first movers are able to install a sufficient customer base that attracts even more customers to the firm and prevents possible new competitors from market entry because positive feedback already works for the incumbents.

From game-theoretic reasoning, such first-mover advantages here can lead to a reputation as a well-performing medium- to slow-motion co-production good provider.

Such a reputation can prevent potential new entrants from entering the market. In the context of network effects, signaling necessities are relevant with regard to gaining competitive advantages.

Once a provider has sent out credible signals to establish a large enough installed base, positive feedback leads to the attraction of even more customers while at the same time implying negative feedback for new entrants (or competitors) who also want to engage in innovative marketing on the basis of similar goods.

Once established in a certain market segment or niche, a medium- to slow-motion co-production good provider in this area is usually relatively well protected against new entrants.

Further possible entry barriers lie in the personalization of the goods to bind the customers by the creation of psychological switching costs.

Buyer power of individual customers is smoothed for medium- to slow-motion co-production good providers because of these possibilities to individualize and customize the adherent good.

A medium- to slow-motion co-production good, having convinced a customer to interact, can build emotional as well as actual customer lock in because of psychological switching costs.

Once a customer has decided on a Specific medium- to slow-motion co-production good, psychological switching cost can come into being because of trust built with regard to the provider and the intangible web-good’s properties.

The customer transfers this trust to the future relationship with the provider. In this context it is also relevant that medium-to slow-motion co-production goods are experience goods, i.e. it takes a while to be able to evaluate the performance of such a good.

This process takes some time, and if the customer at the end of the process is satisfied with the performance of the specific medium- to slow-motion co-production good he or she often prefers to stay with the good already experienced.

Nevertheless, economic switching costs will not reach the level that they do for high-velocity co-production goods, since mostly no money is charged for the web good but revenue is gained in the area of innovative marketing instead.

Hence, it becomes more difficult to bind customers to the firm than in the case of high-velocity co-production goods.

Of course customer loyalty also can be established because of existing experience good characteristics and network effects.

However, since revenue streams are different from those possible with high-velocity co-production goods and the customer here often is less dependent on the transaction provided with regard to medium- to slow-motion co-production goods than he or she is with regard to high-velocity co-production goods, the link between customer and provider is less established.

Nigh-velocity co-production goods usually imply that the customer is dependent on a certain time-specific interaction most efficiently possible via the web.

This is different with regard to medium motion co-production goods. Even though customers like to use these goods, mostly no economic costs for the customer are involved and often these functionalities are seen rather as a “hobby” than as a serious interaction.

This situation can, however, be partly changed by medium- to slow-motion co-production good providers that offer additional functionalities for which the customer is willing to pay, such as certain e-learning functionalities or specific legal advice.

Bargaining power of advertisers is high because medium- to slow-motion co-production good providers mainly rely on innovative marketing as a source of income generation and thus are highly dependent on marketing/advertising revenue.

If a medium- to slow-motion co-production good provider uses the Internet as a channel for advertising its own other products and services and/or to achieve more knowledge about its own customers in other areas, this bargaining power, though, is low.

Substitutes do exist in terms of real life discussion groups, education courses at evening classes or consultancy hours of real lawyers and doctors.

Nevertheless, these substitutes are often seen as complementary and not as substitutes. Further, the real life substitutes usually cost money, and the medium- to slow-motion co-production goods provided over the Internet are mainly for free from the customer’s perspective.

Hence, no danger can be identified with regard to substitutes with respect to the attractiveness of this intangible web-good business.

Other complementary products or services do not play a dominant role as competitive forces for medium- to slow-motion co-production goods.

Rather, medium to slow motion co-production goods are often used as complements to real world goods.

For instance, by establishing a customer discussion forum firms are able to increase product knowledge and identification for their real world goods that are to be sold.

The degree of rivalry between firms of this group is somehow smoothed by the above-mentioned factors, especially by the opportunities to customize the good and bind the customer to the firm.

Nonetheless, these opportunities do not exist to the same degree as for high-velocity co-production goods and are especially not as fruitful with regard to revenue realization because the customers’ willingness to pay for medium- to slow-motion co-production goods is usually low, which reduces their economic switching barriers.

For instance, a dissatisfied customer of a community forum has only invested time with regard to the forum but usually no money, making it easier to decide just to skip taking part in discussions.

Rivals that have also attracted a critical mass of customers are highly dangerous opponents in this context.

The more a medium- to slow-motion co-production good provider is able additionally to use traditional selling of particular features (as outlined above for an e-learning forum), the more opportunities exist to lock customers in.

This feature has to be evaluated for a specific medium- to slow-motion co-production good provider to put the dynamic strategy possibilities – outlined here on a general level – in concrete form.

From the above reasoning it becomes obvious that it is more difficult to erect valuable isolating mechanisms to gain competitive advantages with medium- to slow-motion co-production goods than it is for high-velocity co-production goods.

The most promising areas lie in the field of attracting as many customers as possible on a continuous basis, as well as building and bonding valuable human resources.

Customer loyalty mainly builds on psychological switching barriers and must be permanently fostered.

Because the customer is often not willing to pay but only wants to take part in certain interactions, value must permanently be created to attach the customer to the provider and also attract new customers.

If this is done it is possible to stay successful by trying continuously to be ahead of the competition and survive the often fierce rivalry in the different market segments.

Each interaction has to be a success in the eyes of the customer to make her or him come back and recommend the medium- to slow-motion co-production goods to other customers.

One comment can have immense impact in the context of the Internet, since it can be easily transported to many other users.

Strong human resources can be highly relevant in the process of building the capabilities to attract customers again and, again, and such human resources can be hard to imitate.

Nonetheless, they are not immobile but can usually be wooed away by competitors if their knowledge is not highly firm-specific.

Ways have to be found to bind them to the firm if long term competitive advantage is to be achieved on the basis of their knowledge and abilities.

Lacking these features together, possible dynamic strategies for medium- to slow-motion co-production good providers can be derived.

Chances to be successful in this field are given if a provider is able permanently to create new value to make customers come back again and again and recommend the medium- to slow-motion co-production good to other potential customers.

Specific features that attract and bind customers have to a certain degree to be created. Valuable human resources have to be nourished and bonded to the firm.

The dominant strategies to achieve competitive advantages for these firms are thus to engage in resource and capability bonding, i.e. fixing valuable resources to the firm in terms of appropriating the resulting rents.

Besides, value for customers must constantly be newly created and adjusted to market developments.


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