The very foundation of value chain management is giving customers exactly what they want when they want it. With this end in mind, keeping up with the perpetually fluctuating whims and expectations of consumers can pose quite a challenge to the production side of both large and small companies. One of the most difficult trends to keep pace with is consumer's increasing expectation of product customization. "Most engineers are seeing requests for customized products increase year after year. And it's clear that increase is having an adverse impact on time available for product design changes, new product development, and innovation" (Market Wire, May 21, 2007).
From colors to functions to software, more and more people are approaching products with the expectation of being able to make it suit their particular needs. Rather than being pleasantly surprised with products that do offer customizable features, consumers are angrily surprised when confronted with products that don't.
Many companies, however, are jumping at the opportunity to fill niches that personalize everything including cookie tins with corporate logos, made-to-order bras, and high-end wrapping paper with specific names or slogans emblazoned on water-resistant paper (BusinessWeek Online, Spring 2007)! If a company does find a way to make their products quickly, efficiently, and fully customized they will undoubtedly reap the rewards in today's highly, and perhaps overly, personalized climate.
An example of true production innovation combined with complete customization is the Build-A-Bear company that has gained much popularity in the last five years. Instead of having customers instruct the company on exactly what kind of stuffed animal to make via an online form or the like, the Build-A-Bear company has made making the customized bear itself an integral part of the shopping experience. In malls all across the United States, Build-A-Bear stores entice shoppers in to physically make the stuffed animal of their choice. Customers proceed along a pre-arranged "assembly-line" that starts with the selection of a plain stuffed animal and ends at the check-out counter with a fully personalized product, including clothes, shoes, accessories, and a name. Customers not only end up with exactly what they want, but the activity of putting the product together is an enjoyable and memorable experience. Of course this particular production model can only work with a very specific product type (obviously it would not work with anything that requires technical skills), but the Build-A-Bear company does illustrate the advantage of "thinking outside the box" and can be used as an inspiration when necessary.
Sources:
Breaking the Mold. Spring, 2007. Business Week Online. Reference URL: http://www.businessweek.com/magazine/content/07_17/b4031445.htm?chan=
innovation_innovation+%2B+design_innovation+strategy
Current State of Build-to-Order Practices Hinder Product Development and Innovation. May 21, 2007. Market Wire Online. Reference URL: http://www.marketwire.com/mw/release_html_b1?release_id=255119
Build-A-Bear Official Website: http://www.buildabear.com/
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build-a-bear, business, customization, generation y, management, Needs, opinion, techniques, value , value chain
Showing posts with label consumer trends. Show all posts
Showing posts with label consumer trends. Show all posts
Tuesday, May 22, 2007
Friday, March 30, 2007
US Consumer Pessimism May Lead to Economic Downturn
According to an article published in the April 11th edition of Business Week Online, there is a general pessimism among U.S. consumers concerning the future of the economy despite moderate growth trends that imply economic stability for the remainder of 2007. Although unemployment is currently at 4.4% nationwide, a low since 2001, and 180,000 new jobs were created in March alone, the public still feels shaky about what the coming months will bring. Some obvious reasons for their uncertainty is the Iraq war and the continually changing price of oil. Just how pessimistic one is seems to be related to one’s annual income, namely the wealthy are the least pessimistic of all, while the poor hold the most doubts. (Coy, 2007)
The discrepancy between analytic forecasts and general public opinion should not be taken lightly. Consumer pessimism has the potential to become a self-fulfilling prophecy. Greater pessimism leads to less consumption because people are worried about what the future might bring so decide to save more, which lowers aggregate demand for goods and services. In turn, less demand means less revenue for firms, which will eventually lead to less job creation, and an overall downturn in the economy. In essence, what the public expects to happen, will indeed happen. Their expectations will become their reality due to the self-protective actions (ie less consumption) they take today. In fact, less consumption could cause a significant fall in GDP, as consumers make up roughly 70% of all U.S. GDP. (Coy, 2007) So despite a rather optimistic outlook among forecasters for 2007, public uncertainty and fears for the future may sway the economy downward in very real terms.
Source: Coy, Peter. “The Economy: Why So Gloomy?” Business Week Online. April 11, 2007. Reference URL: http://www.businessweek.com/investor/content/apr2007/pi20070411_639834.htm?
chan=top+news_top+news+index_businessweek+exclusives
The discrepancy between analytic forecasts and general public opinion should not be taken lightly. Consumer pessimism has the potential to become a self-fulfilling prophecy. Greater pessimism leads to less consumption because people are worried about what the future might bring so decide to save more, which lowers aggregate demand for goods and services. In turn, less demand means less revenue for firms, which will eventually lead to less job creation, and an overall downturn in the economy. In essence, what the public expects to happen, will indeed happen. Their expectations will become their reality due to the self-protective actions (ie less consumption) they take today. In fact, less consumption could cause a significant fall in GDP, as consumers make up roughly 70% of all U.S. GDP. (Coy, 2007) So despite a rather optimistic outlook among forecasters for 2007, public uncertainty and fears for the future may sway the economy downward in very real terms.
Source: Coy, Peter. “The Economy: Why So Gloomy?” Business Week Online. April 11, 2007. Reference URL: http://www.businessweek.com/investor/content/apr2007/pi20070411_639834.htm?
chan=top+news_top+news+index_businessweek+exclusives
Friday, February 16, 2007
Race, Internet, and Necessity
According to the March 15 online edition of Business Week the racial gap between those who have internet access and those who do not is narrowing. Recent research reveals that 71% of non-Hispanic whites, 60% of non-Hispanic blacks, and 56% of Latino adults access the internet. Apparently the major difference in internet usage between the races is the quality of internet access and where they are able to connect. Only 29% of Hispanics have broadband in their homes, while 43% of whites and 31% of African Americans have this feature. For those who do not have internet in their homes at all, public libraries are a main source of access. (Holahan, 2007)
This information is interesting when considering what type of good the internet is. Presently the internet is a natural monopoly. It’s largely excludable because not everyone can readily access the internet without paying for it, and it is not rival in consumption because one person using it does not stop or diminish the ability of others to use it. The only exception to this is accessing it through public libraries for free, in which case the internet could be classified as a common resource. However, since this type of access is used much less than access via private subscriptions, the internet is currently a natural monopoly.
As a natural monopoly, the supply and demand equilibrium is largely guided by price alone; only those who can afford private subscriptions have access to the internet. But is this fair? Should this be considered an example of market failure? Should the government do more to subsidize internet access?
Taking into account how large a role the internet plays in both business and personal affairs, not having access to this resource could be as damaging to society as a whole as not having clean water, food, etc. Paying household bills, searching for employment, even higher education, are all facilitated by the internet. The social benefits of providing equal internet access to all citizens may be higher than current demand dictates, marking this as an example of market failure. By providing free access at public libraries, the government is taking steps to correct this situation, but a gap still exists. One way to bring the social demand and supply to its optimal equilibrium is to provide subsidies to low income families, perhaps as a branch of the welfare system, for private access. This may include funding part of computer purchasing costs as well as internet subscription fees. Already the internet is an integral part of many everyday tasks, and as technological advances continue, access will no longer be considered a luxury, but a necessity.
Source:
Holahan, Catherine. “America’s Digital Divide Narrows.” Business Week Online. March 15, 2007. Reference URL:
http://www.businessweek.com/technology/content/mar2007/tc20070315_573361.htm?chan=
top+news_top+news+index_technology
This information is interesting when considering what type of good the internet is. Presently the internet is a natural monopoly. It’s largely excludable because not everyone can readily access the internet without paying for it, and it is not rival in consumption because one person using it does not stop or diminish the ability of others to use it. The only exception to this is accessing it through public libraries for free, in which case the internet could be classified as a common resource. However, since this type of access is used much less than access via private subscriptions, the internet is currently a natural monopoly.
As a natural monopoly, the supply and demand equilibrium is largely guided by price alone; only those who can afford private subscriptions have access to the internet. But is this fair? Should this be considered an example of market failure? Should the government do more to subsidize internet access?
Taking into account how large a role the internet plays in both business and personal affairs, not having access to this resource could be as damaging to society as a whole as not having clean water, food, etc. Paying household bills, searching for employment, even higher education, are all facilitated by the internet. The social benefits of providing equal internet access to all citizens may be higher than current demand dictates, marking this as an example of market failure. By providing free access at public libraries, the government is taking steps to correct this situation, but a gap still exists. One way to bring the social demand and supply to its optimal equilibrium is to provide subsidies to low income families, perhaps as a branch of the welfare system, for private access. This may include funding part of computer purchasing costs as well as internet subscription fees. Already the internet is an integral part of many everyday tasks, and as technological advances continue, access will no longer be considered a luxury, but a necessity.
Source:
Holahan, Catherine. “America’s Digital Divide Narrows.” Business Week Online. March 15, 2007. Reference URL:
http://www.businessweek.com/technology/content/mar2007/tc20070315_573361.htm?chan=
top+news_top+news+index_technology
Saturday, February 3, 2007
Hybrid Sales Down - A Blow to the Environment?
In the March 8th online edition of Business Week, David Welch reports that sales of hybrid vehicles have dropped during the first quarter of 2007. In comparison to last year, hybrid sales only account for 1.8% of total sales, down from 2.1% in 2006. The high price tag attached to these “green” vehicles is the number one reason cited for the lack of sales (Welch, 2007).
The intersection between market performance and environmental concern will undoubtedly be a cornerstone of this year’s economic trends. Building media pressure, such as Al Gore’s Oscar win for “An Inconvenient Truth,” combined with greater environmental awareness will finally force consumers to make a definitive and difficult choice. Either buy the less expensive car and contribute to global warming, or sacrifice those extra dollars and buy the hybrid. Clearly, money, not conscience, is winning the battle for 2007.
As the law of supply dictates, higher prices for hybrids has prompted car manufacturers to produce more of them. Over the next 20 months at least 30 new hybrid models are scheduled to enter the market, up from about 14 models to date (Welch, 2007). And while this may be very good news for the environment, the recent downturn in demand is also exerting pressure for depressed prices. Already companies are being forced to slash prices on hybrids in the hopes of increasing sales, and reaching a new market equilibrium.
But as this price fluctuation is occurring, environmental concerns are becoming harder for everyone to ignore. At some point in the very near future the “more expensive/less expensive” choice isn’t going to be the determining factor for vehicle acquisition. Instead of a movement along the demand curve based on price, a complete shift will occur based on the vehicle’s environmental impact. Whether this shift is prompted by consumer’s good will or governmental controls is still to be seen.
The use of public transportation, an environmentally friendly substitute, may also play a key role in determining the future demand for hybrids. Although more inconvenient than individual transportation, buses, trains, and trams may become the most affordable means of travel for the majority of consumers - dropping the demand for vehicles in general, and allowing the market to settle on a higher-than-average price per hybrid.
However, because most western cultures have come to depend heavily on individual transportation, perhaps a more realistic solution is finding a less expensive way to produce hybrids. Already manufacturers are working toward this end, devising more cost-effective means of production, such as cheaper lithium ion cell batteries (Welch, 2007). Such production cost-cuts will lead to less expensive hybrids, and hopefully more consumer demand…A winning scenario for everyone, including the environment.
Source:
Welch, David. “Why Hybrids are a Difficult Sell.” Business Week, March 8th, 2007. Reference URL: http://www.businessweek.com/autos/content/mar2007/bw20070308_093177.htm?chan=autos_autos+index+page
The intersection between market performance and environmental concern will undoubtedly be a cornerstone of this year’s economic trends. Building media pressure, such as Al Gore’s Oscar win for “An Inconvenient Truth,” combined with greater environmental awareness will finally force consumers to make a definitive and difficult choice. Either buy the less expensive car and contribute to global warming, or sacrifice those extra dollars and buy the hybrid. Clearly, money, not conscience, is winning the battle for 2007.
As the law of supply dictates, higher prices for hybrids has prompted car manufacturers to produce more of them. Over the next 20 months at least 30 new hybrid models are scheduled to enter the market, up from about 14 models to date (Welch, 2007). And while this may be very good news for the environment, the recent downturn in demand is also exerting pressure for depressed prices. Already companies are being forced to slash prices on hybrids in the hopes of increasing sales, and reaching a new market equilibrium.
But as this price fluctuation is occurring, environmental concerns are becoming harder for everyone to ignore. At some point in the very near future the “more expensive/less expensive” choice isn’t going to be the determining factor for vehicle acquisition. Instead of a movement along the demand curve based on price, a complete shift will occur based on the vehicle’s environmental impact. Whether this shift is prompted by consumer’s good will or governmental controls is still to be seen.
The use of public transportation, an environmentally friendly substitute, may also play a key role in determining the future demand for hybrids. Although more inconvenient than individual transportation, buses, trains, and trams may become the most affordable means of travel for the majority of consumers - dropping the demand for vehicles in general, and allowing the market to settle on a higher-than-average price per hybrid.
However, because most western cultures have come to depend heavily on individual transportation, perhaps a more realistic solution is finding a less expensive way to produce hybrids. Already manufacturers are working toward this end, devising more cost-effective means of production, such as cheaper lithium ion cell batteries (Welch, 2007). Such production cost-cuts will lead to less expensive hybrids, and hopefully more consumer demand…A winning scenario for everyone, including the environment.
Source:
Welch, David. “Why Hybrids are a Difficult Sell.” Business Week, March 8th, 2007. Reference URL: http://www.businessweek.com/autos/content/mar2007/bw20070308_093177.htm?chan=autos_autos+index+page
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