Written by Louise Olsson
Ten years ago, Lusch and Vergo wrote an article in which they explored what they believed to be the next dominant logic of marketing, the so-called service logic. This logic suggests that firms should customize offerings and maximize consumer involvement to better fit consumer needs (Lusch and Vergo, 2004). Now, ten years later, this service-logic is more than accepted as many firms do not only provide a service to their consumers but are facilitating a service provided by consumers themselves (Wind, 2008). This is possible due to the Internet and especially Web 2.0 that allows for consumers to interact and share content in ways that was not possible before. This type of peer-to-peer exchange is usually associated with the rise of collaborative consumption, or the sharing economy (Belk, 2014). For those of you who like the idea of sharing can thank Tim Berners-Lee, the inventor of the World Wide Web. As a result of his invention, collaborative consumption is now flourishing and many consumers are starting to prioritize the sharing of goods over pure ownership. Airbnb for travellers, Zipcar and Lyft for transportation and TaskRabbit for skills are only a few of the companies that have already proven to be successful (Lecaros-Aquise, 2014).
It is clear that the sharing economy is here to stay, although we cannot be sure of how it is going to shape itself in the future. What we do know, however, is that it will complicate for traditional marketing practices. Companies whose business model is built on a sharing economy initiative will have to rely on independent actors to deliver their services, which leave them with less control of the service delivery process (Chen et al., 2009). Because of this, we can question the extended version of the marketing mix that consists of 7 P´s. This model suggests that people, process and physical evidence are essential elements in a business to consumer market place in order for the service experience to be successful (Lovelock & Wirtz, 2011). But what if, as in this case, the consumers represent both the consumer and the seller. Then what do people, process and physical evidence mean in a world defined as the peer-to-peer sharing economy?
Collaborative Consumption and The Sharing Economy
Before expanding on this question, let us first define collaborative consumption and the sharing economy, as well as investigate how these came to be two of the most powerful challenges to traditional business in modern history. Collaborative consumption lacks a shared definition but is according to Rachel Botsman, who is considered to be the founder of term, “an economic model based on sharing, swapping, trading, or renting products and services, enabling access over ownership” (Botsman, 2013). Further, she defines sharing economy as “an economic model based on sharing underutilized assets from spaces to skills to stuff for monetary or non-monetary benefits” (ibid.).
Besides from being a reaction to many decades of hyper consumption and the recession that hit the economy in 2008, most researchers agree that collaborative consumption is a term born from the Internet era (Belk, 2014)(Botsman & Rogers, 2011). The Internet empowers and enables peers to collaborate and share products and information online through platforms such as Napster, eBay, MySpace, YouTube, Facebook, Craigslists, blogs, Wikipedia, and Google. Mobile platforms also facilitate consumers with a constant opportunity to stay connected and share content with each other (Deighton 2009). As the Web 2.0 has opened up for consumers to be more creative and contribute to user-generated content, focus has shifted from companies to consumers and from individuals to communities (Berthon, 2012). The interaction allowed by Web 2.0 has lead to a collaboration in manufacturing products and services. Although companies can benefit from this co-creation of value, it also reduces the degree of control over marketing activities. Communities become the heart of the production, not the product itself (Cova et al., 2011). This is similar for companies like Airbnb whose online platform represents the community in which consumers both produce and consume the service by listing and renting out spare rooms among each other. Instead of this being a co-creation of value between firm and consumer, this type of value creation can rather be seen as a community-based co-creation process (ibid.). Because of this, the primary task for companies in a peer-to-peer sharing economy becomes to monitor their online platforms and make sure they work as facilitators of sharing (Christodoulides, 2009). So then back to my question. Since the way companies are delivering services today is shifting, it becomes interesting to look at whether the current definition of people, process, and physical evidence also needs some alteration.
People refers to the service employees who produce and deliver the service. This element is considered to be important as it can have a great impact on the consumer´s perception on service quality (Khan, 2014). In the case of Airbnb, these people represent the hosts who provide rentals. To ensure service quality, Airbnb provides a rating system where users can rate the host as well as leave personal feedback (Airbnb, 2015). This automatically ensures that bad hosts do not receive any bookings. Companies like Rover, who offers dog boarding and pet sitting, also spend a lot of time on training the service providers. They also do reference and background checks, as well as investigate whether every applicant has the personality and experience to maintain an appropriate level of customer service (Andruss, 2014). This indicates that focus in a peer-to-peer sharing economy is still on the qualities of the people providing the service, although the company does not employ them. Instead, the employees in this case are the people monitoring the online platforms. In today´s sharing economy, companies do not focus on selling products but to provide customers with the best decision tools and help them co-create the right solution (Wind, 2008). Therefore, the people monitoring these platforms and are enabling for the right solution to take place, become extremely important for both firm and consumer. Having trained and skilled people on board also becomes important in order to have users stay on the platform. Since the most important form of activity on an online platform is the interaction between peers rather than the interaction between peers and platform-provider, users tend to swap between platforms. To prevent this from happening, trust and loyalty to the platform-provider must be created. And for this to happen, the company must know how to create mutual trust between members (Chen et al., 2009). Trying to identify who are the people in a peer-to-peer sharing economy, it seems like the term in this context holds a slightly different meaning compared to its traditional definition. People might have to be redefined to include people who not only deliver the service, but who also serve the platform on which this service can be exchanged – the producers of the platform. Also, the people who deliver the service no longer represent the employees but are instead independent service providers.
The process is the implementation of an action or function and is especially important when it comes to the delivery of a service. It refers to the pace of the process as well as the skill of the service provider (Khan, 2014). The service offered in a peer-to-peer market place can be delivered must faster since the only requirement for an exchange to happen is access to a personal computer and the Internet. Also traditional components from the value chain such as retailers and distributors have been removed (Plouffe, 2008). Besides from offering a faster and more convenient way of sharing and purchasing goods and services, a peer-to-peer market place is usually a cheaper alternative with a broader selection of items (The Economist, 2013b). Netflix for example, offers instant access to movies, and eBay and Craigslist provide consumers a wide variety of cheap goods. As for Airbnb, they offer easy access to private apartments all over the world. However, as the service is being delivered by independent actors, companies might encounter some difficulties when is comes to the actual delivery of the service (Chen et al., 2009). Even though companies such as Airbnb and Lyft, a taxi-like service, offer a rating system in order for users to feel safe, these rating systems might not always tell the truth. Take eBay for instance where several studies show that most reviews and ratings are positive but the actual level of dissatisfaction is much higher (Ingram, 2013). And although Airbnb´s site allows hosts and guests to find out more about each other, apartments have been trashed and valuables have been stolen (The Economist, 2013a). Yet again, it becomes clear that fostering trust, as a part of the process, is highly important and a challenge for companies operating in a peer-to-peer sharing economy.
Physical evidence refers to the environment in which the service is being delivered. It includes all tangible goods that facilitate performance and communication of the service and is especially important when it comes to the delivery of a service as it provide clues on what quality to expect from the service (Khan, 2014). In a peer-to-peer sharing economy where consumers are the service providers, companies do not easily control for the actions that are taking place when the service is being delivered (Chen et al., 2009). However, what seems to be easier to control for is the online platform on which the first encounter between the consumers occurs. A study performed on eBay shows that system usability, financial transaction and trust, communication as well as customer service and sales support are factors influencing a user´s satisfaction (Papaioannou, 2013). On Spotify, a Swedish music streaming service, Sean Parker believes that convenience and accessibility are what people are willing to pay for (The Daily Best, 2010). IFPI´s digital music report confirms this but also adds ease of payment and trust as important components (IFPI, 2014). And David Lee, founder of SV Angels, an early investor in Airbnb, explains how the importance of attracting users is just as important as providing a trustworthy community (The Economist, 2013a). All in all, it seems like convenience, accessibility and a trustworthy system is equally, if not more, important than physical features in a peer-to-peer market place.
One could summarize this by saying that people, process and physical evidence still matter more or less in a peer-to-peer sharing economy in order for the service experience to be successful. However, in the context of collaboration and sharing, these three service elements might have a slightly different meaning compared to how they are being defined in a business to consumer market place. First, people in a peer-to-peer sharing economy do not only seem to be referring to the independent actors providing the service but also to the employees monitoring the online platform. Second, the pace of the service delivery process in a peer-to-peer sharing economy appears to be defined as faster and more convenient as few requirements are needed and intermediaries have been removed. Third, a trustworthy online platform and service delivery process also seem to be highly important, possibly more important than physical features, but also a great challenge for many companies to establish.
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