A few days ago, a delegation from Spain visited UC Berkeley in a meeting organized by the Spain-USA Chamber of Commerce with the participation of the Universities of Valencia, Sevilla y Malaga and representatives of the public administrations of the Spanish central government and regional governments of Andalucía y Valencia and six Spanish Start-ups.
The two most interesting parts of the meeting were a presentation by J. Miguel Villas-Boas Professor of Marketing Strategies at UC Berkeley Haas School of Business and a panel with the six Start-ups chaired by Ken Singer from the Centre for Entrepreneurship and Technology (http://cet.berkeley.edu/) who has been himself a serial entrepreneur.
Prof. Vilas-Boas spoke about “Branding and Pricing Strategies in the Digital Economy” .
He set the scene by speaking about consumer behaviour on the web when searching for products to purchase.
It was expected that the digital world would lead to “low prices and lesser role for brands” … in reality there is a lot of variability in prices and still very powerful brands…. and not to be forgotten “search is costly for customers in terms of mental effort”!!!. Therefore, vendors, like customers, have to strike the balance between the information to gain with search and the search effort; research has found that ” the optimal purchase threshold increases with informativeness of search and decreases with search costs”.
If that is the case, how much information to provide? Too little …..customers do not have enough information to buy and may go somewhere else… too much (information overload) impacts the cost of search about the product… What about “on purpose Product Obfuscation”, so that it is more difficult to compare prices?. It looks that structuring the product information in order to easier consumer search while avoiding information overload is the best approach.
On pricing, the question is how to price given consumer search effort and behavior…. low price means low margins but consumer do not have to search much to buy… higher prices means higher profits but consumer will likely search more for better deals.. how to strike the balance?
Another interesting part was about “personalization”; the central question is: how to learn about customers so that price differently, do product personalization and target the message?. There are strategies to attract new customers , for instance offer discounts, and to price strategically at the beginning of campaigns to separate high valuation customers… the problem is that consumers may understand that this may be happening and refrain from buying to get discounts later….
For known customers, product targeting based on their previous preferences is a good strategy but it is important to strike the right balance : look for the better fit between advertising and customers preferences, avoiding getting them annoyed with too much advertising…..
Another part of the presentation was about “Brands in the Digital World”. Based on market research he gave information about “the most valuable global brands in 2013”.. Apple, Google, Coca-Cola, IBM and Microsoft leading the pack. However, looking at social media mentions, the top brands for 2012 were Coke, Gatorade, Apple, Google and Starbucks…while if one looks at fan pages, Facebook, You Tube, Coca-Cola, Disney and MTV lead the pack.
The final part was about co-creation. He spoke about how Mountain Dew, who sells soda drinks and Starbuck , who as you know sells coffee and food, engage with customers to create new flavors (Drewmocracy they called the campaign!!!) or looking for new ideas for products. According to market research, internet users, at least in the United States, like brands to listen to them; the proportion is higher in ages 25-34 and 35-44 and the main reasons are : support for the brand they like, to receive regular updates about the products or to get coupons.
I have recently had the opportunity to have a coffee with Professor Villas-Boas and we spoke about data privacy issues when identifying the customer (see my previous posts on this matter) and co-creation.
I wanted to see how to apply the approach and techniques mentioned above to the public sector or what the public sector should do to engage better with citizens and the civil society using the internet. He has introduced me to a Hungarian researcher, Zsolt Katona, who also works on the subject of co-creation in the Hass School of Business and I will meet him soon. I am sure the collaboration will be very useful for my research project.
The second interesting item of the conference was the panel with the Spanish entrepreneurs chaired in a very professional manner by Ken Singer. Participated the CEOs of Brave Zebra (game outsourcing company), Closca (manufactures foldable bike helmets), Imegen (DNA sequencing) , GPTech (technologies for removable energies) and Melomics Media (Applies Artificial Intelligence to music composition). They were asked about their personal history as entrepreneurs and the reasons to start it, the challenges they found, the relationships with the academic world if any and what they would ask the government to do to facilitate their life.
I think these guys are real heroes (particularly in Spain…and have sacrificed many hours of their life to make their ideasbecome a reality….. and all of them said that money was not the first reason for them to start a company…. !!!
Stay tuned.. more to follow this week !!