How To Use Price to Compete In The Collaborative Economy

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numbers-money-calculating-calculationIf you want to compete with startups like Instacart, Uber and Etsy, there’s one aspect of your product or service that you might want to re-evaluate: your price.

As we revealed in The New Rules of the Collaborative Economy, a report I co-authored with technology strategist Alexandra Samuel, cost savings is a key driver in the growth of the collaborative economy—the economic phenomenon where people get the products and services they need from each other instead of buying them by traditional means.

The report, based on a study by Vision Critical, the leading customer intelligence platform provider, shows that price is a significant driver to the growth of the collaborative economy. We found that a great majority of sharing transactions are at least partly motivated by price. Our study shows that getting a good price is an extremely or very important factor in 68 percent of sharers’ latest sharing transactions.

In fact, we found that more than half of traditional purchasers—those who choose traditional ways of buying instead of using a sharing service—will consider the collaborative economy if it means saving 25 percent. Cost is an even bigger factor among younger customers like millennials and Gen Zs.

 

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For traditional companies that want to win back customers who are now participating in the collaborative economy, price is a critical competitive tactic. If the buying option were less expensive, an overwhelming majority (70 percent) of sharers would consider buying instead.

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So what does this mean for established brands that are in the crosshairs of the collaborative economy movement? These tactical considerations are a good start:

  1. Lower your price, if possible. Financial savings is a big motivation for sharers in the collaborative economy, and your customers will switch from sharing to buying if it means more cash in their pockets. Offer other value added services, such as on-demand services, insurance, and more.
  2. Reduce cost of ownership via rental. For companies that sell expensive, infrequently used products, enabling access via rental models to your products could be an easy way of participating in the collaborative economy. We’ll share some real-world examples in our upcoming webinar.
  3. Empower your customers to sell back pre-owned goods. Establishing a used goods marketplace could make sense if your customers are already buying or trading your pre-owned products. Not only does this prove product durability, a commitment to the environment, it also provides opportunity for upsell later.

Join me on December 1 for a live Vision Critical webinar for a deeper dive on how to use price as a competitive tactic in the collaborative economy.

Should Silicon Valley Fix Its Image Problem?

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Silicon Valley is known for a lot of positive things, but there’s clearly a negative sentiment from outsiders. The question is, does Silicon Valley want to fix this image problem?

Decades ago, before it was called “Silicon Valley,” it was an area abundant with fruit and flower farms, redwood harvesting, and scattered towns connected via dirt roads. This fruitful area has also blossomed into computer chips, hard drive platters, networking gear, devices, computers, and internet companies galore. Many have become famous, gathered many riches, and helped to change other people’s lives. Today, Silicon Valley is experiencing the second gold rush, where investors, entrepreneurs, workers, and more flock to this region to strike it rich and make a difference.

To understand perception, I asked my social media network of followers and friends who are NOT from Silicon Valley to chime in and leave three words about what their perceptions are of Silicon Valley, see the raw post on FB. The goal wasn’t to argue, or to judge, but to listen and learn what others think. We stripped out any answers from folks that I knew were from the area, and well, the findings are pretty surprising. There’s quite a bit of negative sentiment toward Silicon Valley, in addition to the adoration. Of course, this is not a truly scientific endeavor, these respondents are in my social graph, and I would make the assumption they’re familiar with the tech industry or business, which is my primary topic.

A few findings: There are 534 words submitted that are ‘stand alone’ words. We segmented the data by sentiment; 161 are positive, 192 are negative, 181 are neutral. It was difficult to classify some of the phrases or words, so we had to do some data massaging and remove synonyms. There were some clear trends, as ‘Expensive’ showed up 36 times and ‘Innovative/innovation’ showed up 38 times. All of those wonderful things come with some severe drawbacks, which are nicely illustrated in the tag cloud, first let’s explore the positive sentiment.


Below Word Cloud: Positive attributes provided from people who are NOT from Silicon Valley. 

The patterns are clear; Innovation scores the highest, then opportunity, exciting, optimism, and dreams. If I had to summarize it, this is a place to create and fulfill a dream. It’s arguable if young is a positive sentiment, as ageism is becoming rampant as investors favor the youth. It’s also interesting to see a variety of descriptions related to smart, ideas, and knowledge. I assume beautiful is related to the area, as the culture in Silicon Valley isn’t driven by physical beauty or fashion.

 

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Below Word Cloud: Negative attributes provided from people who are NOT from Silicon Valley. 

Big trends are around the expensive cost of living (now the highest in the nation), arrogant, self-absorbed, delusional, and insular. Basically, if I had to summarize it up, it would be “Rich Asshole.” While the previous tag cloud shows a region where people are fulfilling dreams, you can see how this quickly results in terms like “overworked, entitled, inequality” for those that make it. This of course results in interesting terms like “hype, overinflated, and ethnocentric.”

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Below Word Cloud: Both positive, negative and neutral attributes provided from people who are NOT from Silicon Valley. 

Putting all the data together, you can see how al the terms nicely come together, including some neutral terms like “Unicorn, Investment, Money, White” and other names of popular local companies. Together, this is a real indicator that this is a dynamic region filled with ups and downs and complexities in a fast moving environment.

SV_WordCloud_JasonDavies_ALL


Silicon Valley has an image problem, should they fix it?
Beyond all the positives of entrepreneurs chasing their dreams to change the world (while getting rich at it), Silicon Valley has a perception issue relating to an insular entitled group of rich assholes. A question I have for you is: Is Silicon Valley aware of this perception gap? Do they care? Should they do anything about it? Or is this just the natural state of an innovation area? Love to hear your thoughts in the comments.

Could you imagine the Santa Clara or San Mateo chamber of commerce funding a PR campaign to recast the stereotypes? Could you imagine cultural education and PSA emerging to billionaires to not flaunt it? Or just let it be.

Update: Francine Hardaway says that Chambers of Commerce in Silicon Valley area shouldn’t waste any resources on a PR campaign.

Infographics: Growth of Sharing in the Collaborative Economy

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Participation in the Collaborative Economy has grown by 25 percent in the past year alone. That’s one of the key findings we shared in The New Rules of the Collaborative Economy, a Vision Critical report I co-authored with tech strategist Alexandra Samuel.

As the infographics below shows, more than 110 million North Americans now do some form of sharing in the Collaborative Economy. More than half of North Americans now get the products and services they need from each other, peer to peer, instead of buying from established corporations.

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The rapid rise of the Collaborative Economy raises an important question for businesses: what’s driving the growth of this movement? More importantly, is it a permanent shift in customer behavior? Data in our report, which draws on input from more than 50,000 North Americans, provides some crucial insight on these issues.

We found that a big driver of growth in the Collaborative Economy is the adoption of newer forms of sharing services. In 2014, 16 percent of American sharers engaged in only one form of sharing: by buying and/or sharing pre-owned goods. This year, that number is down to 10 percent because people are trying a broader range of sharing services.

Looking at the various categories of sharing services, we’ve seen an across-the-board increase in sharing. Sharing of goods is still the most common form of participation in the Collaborative Economy, but there’s also significant growth in crowdfunding, space-sharing and custom products. Online learning, a sharing category we included for the first time this year, is already seeing a 15 percent participation rate.

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The growth of the Collaborative Economy isn’t about to stop anytime soon. Based on people’s intent, we’re predicting that eight in 10 Americans will be part of the Collaborative Economy by 2017—a 20 percent increase from 2015. Growth of “neo-sharing”—participation in the latest generation of sharing services—will fuel the overall growth of the Collaborative Economy. For every person who has participated in a form of sharing in the past 12 months, there’s a new person who intends to try that type of neo-sharing in the year to come.

 

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Clearly, the Collaborative Economy is here to stay. Combating startups, complementing sharing services and gaining a deeper understanding of the empowered crowd is an urgent call for established corporations today.

So what does this mean for established corporations? Three things:

  1. This is not a fad or trend—it’s a movement that’s here to stay. Adoption is accelerating due to social trends, economic conditions, and availability of powerful technology.
  2. Not all behaviors are the same. As indicated above, the sharing of goods is dominant, but every industry must first understand how their market segment is changing.
  3. Established companies must lead this movement by changing their business models to suit the needs of changing customer preferences. We’ll share more, in our upcoming webinar.

To learn more about the growth of sharing, join me inThe New Rules of the Collaborative Economy, a live webinar with Vision Critical founder Andrew Reid on December 1.

Introducing: The 2015 Crowd Companies Awards

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Crowd Companies’ member organizations consistently work to overcome challenges while leading their teams in adapting to, and thriving within, the Collaborative Economy. Their efforts to connect with new the crowd behaviors have not gone unnoticed.

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2015 Crowd Companies Awards Recognize Collaborative Economy Excellence:

At the Crowd Companies “Main Event” in San Francisco on Oct. 6-7, we presented awards to five member companies that have exhibited excellence in the creation and execution of Collaborative Economy programs. The following companies have proven ROI as a result of their dedication and initiative deployment in the areas of on-demand integration, crowd collaboration, brand innovation, and enablement of makers and marketplaces. Below are photos of Angus Nelson of member success and I, presenting awards at the council event.


Whole Foods Market: On-Demand Integration Award 

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The On-Demand Integration Award recognizes Whole Foods’ partnership with the Instacart marketplace to provide on-demand grocery delivery services to its customers in 15 U.S. cities. Through this partnership, Whole Foods Market offers its customers the convenience of online grocery shopping, delivery, and pickup without having to handle the logistics themselves. Whole Foods’ partnership with Instacart has resulted in more than $50 million in sales from 160 stores nationwide, and in-store Instacart ads have created a higher lift of product sales.


Swisscom: Crowd Collaboration Award with Swisscom Friends

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The Crowd Collaboration Award recognizes Swisscom’s utilization of the crowd to bolster its customer service efforts in a free online community. Swisscom Friends, run on Mila, solves customer needs by connecting them with nearby tech-savvy professionals to provide support for small product/installation issues. In a public interview, the company announced results from Swisscom Friends, including: offloaded support requests from traditional customer service department, enhanced self-care, increased customer satisfaction, and the potential for low-pressure sales upgrades.


BMW: Brand Innovation Award with DriveNow Car Sharing Program

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BMW: Brand Innovation Award with DriveNow Car Sharing Program. The Brand Innovation Award recognizes BMW’s provision of car-sharing services through its DriveNow program. Members of BMW DriveNow use the brand’s mobile app or website to locate BMWs (fueled and electric) available for on-demand rental within the business districts of San Francisco, Vienna, London, and many German cities. By actively becoming a supportive member of the Collaborative Economy, BMW has publicly indicated that the German DriveNow car-sharing program is profitable.


Autodesk: Maker Enablement Award

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The Maker Enablement Award recognizes Autodesk’s empowering the Maker Movement from the CEO on down through offering access to its design software, tools, and programs to the creative masses. Through providing free software and curriculum to schools, educators, and students; offering 17 personal design and creativity apps; inspiring maker communities through Instructables and Creative Market; and offering an artist-in-residence program at its San Francisco workshop, Autodesk has showcased its commitment to furthering the power of makers to design, build, and innovate.


Intuit: Marketplace Enablement Award

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The Marketplace Enablement Award recognizes Intuit’s commitment to the rapidly expanding marketplace of freelancers and independent contractors within the Collaborative Economy. Its launch of QuickBooks Online Self-Employed enables contractors to manage business and personal finances, handle taxes throughout the year, and easily meet compliance requirements, including with partnerships with a variety of organizations in the ridesharing spaceand Peers.


Congratulations to all the well-deserved winners! We look forward to seeing our members mature and deploy in the coming year and plan to continue our awards in 2016.

The Real Mythical Creatures of the Collaborative Economy: Centaurs, Unicorns, and Pegasus

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Above: Version 1.1, with updated data. Version 1.0 is available here.

Collaborative Economy valuation is through the rainbow-beaming clouds. These highly funded, fast-growing, media-hounded startups are the portfolio darlings of any venture capital firm, while this crowd-based, on-demand, collaborative category enables people to access resources from peers using efficient mobile devices.

The Collaborative Economy market has received a total of $25 billion in investor funding, but not all companies are equal. Using the “mythical” creature lexicon of Silicon Valley, we’ve sorted Collaborative Economy startups based on highest valuation. We didn’t even include the “Little Ponies” that are valued at $10 million – $100M as the list would be in the hundreds.

Working with VC Dave McClure of 500 Startups, who has been championing a number of these fun terms, we constructed this handy little chart so you could see which startups have achieved high valuations.

Is this space over-funded? Over-valued? I’m sure that’s the case for some of these companies, as frothy tech markets are a normal part of the startup scene. The difference between these startups and prior years is that they are generating revenue from every transaction. In fact, most startups take a 10 to 15% cut from every transaction in the marketplace. One danger of over-valuation means that acquisition becomes near impossible, with the most obvious exit being an IPO.

If the valuations are incorrect, kindly leave a comment below, and I’ll amend the database. We plan to  eventually publish an updated version.

Related resources:

(And yes, we know the plural of Pegasus is Pegasi.)

Report: The New Rules of the Collaborative Economy, 2015 Data on the Rise of Sharing

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The biggest shift in the business landscape since the Internet continues to grow—and established, traditional companies need to act soon in order to compete. That’s one of the key findings in The New Rules of the Collaborative Economy, a report I co-authored with tech researcher Alexandra Samuel, released today. The report is an update to Sharing is the New Buying, a 2014 report that, for the first time ever, mapped the prevalence of the collaborative economy and its impact on the business world.

You can download the full report The New Rules of the Collaborative Economy, at no cost.

What is the collaborative economy?
The collaborative economy is an economic movement where common technologies enable people to get the goods and services they need from each other, peer to peer, instead of buying from established corporations.

You don’t have to look very far to see how disruptive the collaborative economy has become. Today, the world’s largest hospitality brand—Airbnb—owns not a single room or hotel and is worth $25 billion. Uber, valued at over $50 billion, is the world’s largest taxi service—and it doesn’t own a single vehicle. Barely four years old, the online grocery shopping service Instacart is already worth $2 billion.

Overall, the collaborative economy has produced 17 billion-dollar companies and 10 so-called unicorns. Collectively, sharing startups have already received $15 billion in funding—surpassing the social media space that spurred giants like Facebook, Twitter and LinkedIn.

How big is the collaborative economy?
In one word: massive. We used Vision Critical’s customer intelligence platform and discovered that at least one in five customers now chooses sharing as their initial preferred option. The past year alone has seen an impressive growth in the collaborative economy. In North America, participation in this space has grown by 25 percent. More than 110 million people in the U.S. and Canada have participated in some form of sharing in the past year.

The collaborative economy encompases many different categories and different forms of sharing. Last year, we looked at 11 categories; this time, we explored 13, adding online learning and Bitcoin to the list. It’s worth noting that all categories that we looked at this year have seen some growth in participation—reiterating the impressive growth of this movement.

The following inforgraphic is a portion of the full report, which you can download at no cost.


 

Is sharing here to stay?
To determine the staying power of the collaborative economy, we asked people who stopped using sharing services in the past 12 months why they did so. In every category of sharing, about 2 to 6 percent of sharers report skipping that form of sharing in the past 12 months even though they had previously tried it, so we asked them why. Is it due to disenchantment with the sharing movement?

What we found is that people who stopped sharing in a certain category are doing so not because of dissatisfaction but because of experimentation. Indeed, 70 percent of people that have used a given form of sharing (but not in the past 12 months) say they’re likely to try that form of sharing again in the future. And, in fact, people who’ve dropped out of one or more categories of sharing are the people most likely to be engaged in other forms of sharing. In other words, people are trying different forms of sharing, sometimes to the detriment of other categories.

Dissatisfaction is not a factor. Where a sharer has given up on a form of sharing in the past year, only two percent of those instances are due to the sharer having a bad experience.

Will the collaborative economy grow even more?
Based on people’s intent to try different sharing services, we’re forecasting that eight in 10 Americans will be part of the collaborative economy by 2017. But the bigger threat for companies is this: as many as three in four traditional buyers have indicated that they might choose sharing instead of buying in the next year. For every person who has participated in a form of sharing in the past 12 months, there’s a new person who intends to try that type of sharing.

Conclusion
The continued, rapid growth of the collaborative economy makes it clear that sharing is not a fad. Figuring out how to compete in this space is an urgent issue for companies today, and it’s one of the main reasons why I founded my company, Crowd Companies. To remain relevant, brands need to get closer to their customers and identify the business models that make the most sense for them.

If you’re not yet feeling the effects of collaborative consumption, it’s only a matter of time. Sharing is disruptive and the companies that win in the collaborative economy recognize that they must change with and for their customers in order to thrive.

Download the full report The New Rules of the Collaborative Economy to learn more.

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