A recent NY Times article argued that if Uber can find a way to lever its own network effects, it too can be a Microsoft or Google.[1] Due to its initial success, Uber is now the protest target of the incumbent regulated taxi companies wherever it begins service, around the world. While Uber will contribute to creating a market network effect, it will not likely create its own brand network effect.
First, we need to differentiate between market versus brand network effects. Networks effects refer to the increasing benefit consumers receive as more consumers buy a product or service. One example is how the early adopters of the Internet received increasing benefits as increasing numbers of users adopted the Internet and participated in creating and posting increasingly useful information, businesses, and news. This example describes market network effects derived the collective adopting the Internet, and not necessarily of a brand.
Apple is an example of brand network effects. By choosing a proprietary approach to many key business decisions, like operating systems, product, software, and accessories compatibility. Its commitment to a proprietary approach create a brand network effect; e.g., increasing numbers of iPhone adopters led to increasing benefit for any one consumer having Facetime. The strategic risk of the proprietary approach is a topic for another essay.
Can Uber become the dominant brand in its sharing economy space? Quite possibly. Can Uber gain brand network effects? Unlikely.
Uber is an entrepreneurial taxi startup service with a $250 million investment from Google. The implied valuation and the absolute size of Google’s financial commitment suggest there will be considerable momentum for brand success. The company is receiving attention now from the incumbent, regulated taxi services that are claiming Uber is threatening the viability of the traditional taxi operators. Other viable competitors exist, like Hailo and Lyft. Halo is partnering with traditional taxi operators so it may be able to survive the inevitable regulations that are sure to come. Lyft has received a $250 million investment so it can meet Uber price cut for price cut and build the industry. There may only be an oligopoly at the end, there may be market network effects, and Uber may have economies of scale, but not brand network effects.
Frequently, we want to get a new product out into the market as swiftly as possible so as to enjoy our returns as swiftly as possible, but costs accumulate swiftly. To mitigate initial costs, we could roll out less aggressively and let introduction costs accumulate slowly. Do we know when to accelerate our efforts, and when to go easy? It matters depending on whether the underlying innovation is technology-based or design-based, whether we are marketing to global markets and whether those market cultures tend to avoid or embrace uncertainty, and the importance of social status in those market cultures.
HOW THEY RESEARCHED IT:
This study examines the length and success of new product rollout strategies, based on variables including types of innovation as well as cultural factors. Fourteen new product innovations of cell phones were observed in eight European countries by 17 unique firms between 2000 and 2007. Innovations were either technology-based or design-based. Technological innovations improve functionality whereas design innovations improve stylistic product features. The researchers measured uncertainty avoidance (culture seeks ways to control future events via planning, institutions, etc.), power distance (sensitivity of citizens to social status differences), and individualism for each country. Hypotheses were created based upon each of the four factors and whether or not a long or short time lag for technological and design innovations would be more successful. Time lag was by the number of months elapsed between the month in which an innovation was initially introduced and the month in which the innovation was launched in another focal country.
WHAT HAPPENED?
The researchers found that a longer rollout strategy for a new product is more effective when the product is a technology-based innovation. In contrast, a shorter new product rollout strategy is more effective for design innovations. Further, longer rollouts lead to greater market share in high uncertainty avoiding markets for technology-based products, but shorter rollouts lead to greater market share for low uncertainty avoiding markets for design-based products. The researchers inferred that technological innovations require time for education and accommodation in cultures that are high in uncertainty avoidance. Regarding power distance, technology-based innovations were found to be more readily adopted in cultures with high sensitivity to social status, suggesting that technology adoption may facilitate status perceptions. Surprisingly, individualism and uncertainty avoidance did not affect performance and/or market share; this is not consistent with prior research that suggests individualist countries are more likely to adopt new products, in comparison to collectivist countries.
WHY MANAGERS SHOULD CARE:
Substantial investment is made in developing and launching new products and global competition pressures firms to rollout new products as quickly as possible. Many factors are considered, but lead time management is rarely considered. Regional cultural differences as well as the type of innovation should be factored in planning new product launch strategy. Manager must expect a longer rollout for technology-based products in uncertainty avoiding markets to give the market time to absorb complexities, although cultures with high status sensitivity might be quicker to adopt. Design-based rollouts can be accelerated. While the authors suggest no such speculation, a technology-based product with high design value could accelerate a successful rollout process. This would explain how Apple has been so successful regardless of where it introduces its iPod, iPhone or iPad.
CAN YOU HELP?
Does your actual experience support or refute these findings?
This research was done by Gaia Rubera and David A. Griffith at Michigan State University, and Goksel Yalcinkaya of the University of New Hampshire and published in Journal of Product Innovation Management. The authors want to thank Alatest.com, developed by International Consumer Services Sweden AB, for providing access to the data pertaining to the product category investigated.
CHALLENGE:
Can ‘awe’ engage consumers and make a brand viral? We know that emotions play a major role in brand engagement. Now a study of what makes NY Times’ articles viral may give us an insight. It turns out that readers like to share articles that have a particular quality that went beyond disasters, surprise, practicality, or sex. That quality turned out to be ‘awe-inspiring.” This is an “emotion of self-transcendence, a feeling of admiration and elevation in the face of something greater than the self.” Can a brand be awe-inspiring?
HOW THEY RESEARCHED IT:
Jonah Berger and Katherine Milkman, assistant professors at the University of Pennsylvania, led a study examining the relationship between psychological processes and whether a specific New York Times article makes the newspaper’s most emailed list. Berger and Milkman used a webcrawler to capture data from the Times homepage, which continually reports which 25 of its articles have been emailed most frequently, every 15 minutes over a period spanning six months. The webcrawler recorded the title, full text, author, topic area, and one sentence Times summary, as well as the section, page, and publication date of each article. Of the 7,500 original articles, 3,000 were randomly sampled and coded based on inclusion of practical content, inspired awe, and evoked surprise. The emotion and positivity of a given article were also included and determined by an automated sentiment analysis. Control variables such as placement of articles both in the print and electronic versions of the Times, time spent in prominent positions, gender and fame of the author, page advertising on the homepage, writing complexity, article length, and how interesting each article was were accounted for through various means.
WHAT HAPPENED?
Analysis of article content and frequent emails reveals that content’s ability to inspire awe is strongly associated with its virality. Stories that inspire awe are more likely to make the NYT most emailed list, even when distinguished from other virality causing factors such as practically useful information, surprise, positive valence, and affect laden content. The relationship between awe and virality is robust even controlling for prominent article placement and other external factors. Additional analyses were implemented to verify data, including the General Inquirer’s automated textual analysis software as well as an alternate hand-coded measure of awe.
Previous research on drivers of diffusion focuses on aggregate social structures or the positions of certain individuals within those structures. This research is unique in that evidence reveals the important role played by psychological characteristics of content in determining field virality. Whereas transmissions of practical information suggest a simple motive of value exchange, awe-inspiring virality is about deepening social connections and placing value in knowledge for knowledge’s sake. Awe-inspiring and emotional content are both more likely to make the most emailed list, and consumers are more likely to pass on information that is positively valenced. Surprise influences virality to a lesser extent, however surprising content differs from awe-inspiring content in that it lacks vastness as an elicitor.
WHY MANAGERS SHOULD CARE:
If you have not yet seen Steven Jobs’ launch of the iPad, take a look at this ‘awesome’ 3-minute condensed humorous perspective:
Apple is famous for its ‘awesome’ products. Inspiring brand awe in consumers is not oft heard in the context of management goals such as creating brand awareness, satisfying customers, and targeting new market segments. However, the notion that the ‘awesomeness’ of a brand can lead to viralness and a fanatic following is something worth looking into. Many of the content factors discussed in the New York Times experiment are commonly found in today’s marketing. But how often does a branded message inspire awe? As defined by the study, “stimuli that open the mind to vast and often unconsidered possibilities can inspire awe, a unique human emotion that expands a reader’s frame of reference”.
Managers should strive to force consumers to think outside his or her frame of reference in order to achieve top brand virality. Awe-inducing stimuli are usually entertaining, inspiring, and contain a good deal of information, as well as challenge existing mental structures. The consumer must also experience something vast, be it physically, conceptually, or socially. Examples of the most awe-inspiring articles from the New York Times include “The Promise and Power of RNA” as well as “Fury of Girl’s Fists Lifts Up North Korean Refugee Family”. Reevaluating current strategies to emphasize eliciting positive emotional responses as well as challenging the thinking of consumers may lead to a significant increase in brand awareness, saturation, and virality for managers.
CAN YOU HELP:
Comment back by discussing how your company has attempted to increase brand virality. Have your efforts been rewarded? Do your techniques qualify as awe-inspiring?
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