Wharton - Connected Strategy Flashcards
Wharton’s Nicolaj Siggelkow and Christian Terwiesch
n an increasingly competitive marketplace, it’s no longer good enough for company to sell a product through a simple, one-time transaction with shoppers they may never see again. Businesses can create more value for themselves and their customers if they learn to develop a connected strategy. That’s the message from Wharton professors Nicolaj Siggelkow and Christian Terwiesch in their new book, Connected Strategy
what is connected strategy?
Building Continuous Customer Relationships for Competitive Advantage in a way to turn occasional, sporadic transactions with customers into long-term, continuous relationships–while simultaneously driving dramatic improvements in operational efficiency. By leveraging technology, firms can gain more intimate knowledge of their customers, even anticipating and fulfilling their purchasing needs before the customers themselves know what they are.
what are two elements of connected strategy?
connected customer relationship –> drive up customer satisfaction and increase willingness to pay
connected delivery model –> reduce cost
what is value defined by Wharton professors of connected strategy?
value created = cost - wilingness to pay (“customers’ happiness in dollar amount”)
value proposition = Willingness to pay - Price
What is the equation for competitive advantage?
CA = your (WTP - Cost) - next strongest competitor’s (WTP-Cost)
What is market segmentation?
- finding groups of customer who are similar in their WTP
- CA should be viewed segment by segment
What is efficiency frontier of WTP and fulfillment costs? what can connected strategy do to this frontier?
the line indicating how WTP are correlated with cost on aggregated level in the market.
connected strategy can push the frontier outward by increasing WTP and reducing costs at the same time.
Why is it difficult or costly to achieve customization in general?
Customization is costly to achieve when:
- customers have different tastes
- customers’ needs keep changing
- when customers are not aware of their needs or act on their needs
what are the 4 R’s of connected customer relationship?
recognize, request, respond, repeat
- recognize the need of a customer
- translate info to a request
- respond to the request
- repeat interaction many times
what are the types of connected customer relationship?
- Respond-to-desire: firm know exactly how to respond to customers’ requests
- Curated offering: first respond to and anticipate customer needs by providing a customized set of products and services
- coach behavior: first try to nudge customer behaviors to help overcome inertia or decision bias
- automatic execution: firms deduce and anticipate needs and fulfill them
How a customer’s journey looks like?
latent need –> awareness of the need- > look for options –> decide on options -> order -> pay -> receive -> experience customer service –> post-purchase experience
it’s important to think about what pain points along the journey that the firms can provide solutions to increase their WTP at a reasonable cost.
How many types of connection architecture?
The connected producer, The connected retailer (i.e. Edx, customers connect with content by Universities on Edx platform), The connected market maker (i.e. Amazon, which provides a platform for consumers to connect with sellers but will not hold inventory for the sellers, i.e. Expedia), The crowded orchestrator (i.e. Uber, which connected crowd suppliers and crowd customers), peer-to-peer network creators (the boundary between suppliers and customers are blurred i.e. crowd funding, transferwire, InnoCentive, Bla bla car of carpooling)
How does connection matrix analysis do?
list four levels of customization vertically, connection architecture horizontally, we can put company in each cell to see how they connect with customers and think about what takes to get them to another level of customization.
What is revenue model?
the mechanisms under which company capture the values by selling products or services.
