Copenhagen Business School Master Thesis
Digital brands and brand value:
implications of consumer-brand co-creation on brand value and brand strategy.
The cases of network orchestrators Airbnb and Uber.
Authors Hand-in Date
Carina Wiesinger & Christina Eckerstorfer 15 May 2017
Supervisor Characters
Anne Martensen 245,374
Study programme Pages
M.Sc. EBA Brand & Communications Management 116
A BSTRACT
Network orchestrators and branding have been researched only independently. This thesis aims at establishing a theoretical link by proposing a framework consisting of innovative business models and brand value co-creation, and applying it to the cases of Airbnb and Uber. Given that brand switching is easy within a digital environment, determining how sustainable brand value can be created by integrating users in value creation processes will reveal how brands can achieve a competitive advantage and provide valuable implications for brand strategy. The proposed framework provides the basis for an inductive research approach. With qualitative methods in the form of focus group, in-depth interviews and netnography, data from Airbnb and Uber users was gathered. Findings suggest that digital brands are viewed as rather abstract, adaptable and need to be authentic; trust is crucial. Airbnb is generally trusted but its slogan of belonging does not resonate with users. Uber experiences authenticity and image issues, and users primarily value the service rather than the brand. In general, users are not actively interested in co-creating, and transparency and contact with the brand are appreciated. While mostly passive participation of the brand is preferred, active integration is sometimes accepted. There is no real community feeling, and co-creation so far consists primarily of ratings, reviews and declaration of issues. Concerning managerial implications, the essence of branding stays the same. However, brands are advised to create trust with dialog, engage users externally, adapt via co-creation and take an active position if there is an added benefit for users. Brands with an established identity are advised to adapt it to users and focus on co-creation to build the consumer-brand relationship. Brands with a rather weak identity should focus on co-creation to build the brand. In case of image and trust issues, co-creation helps to get feedback and listen to users. This will create trust, enabling co-creation of value centered on a strong brand. Also, the proposed theoretical framework is dynamic and allows for adaptation as it consists of single holistic concepts that can be extended, deepened or applied in parts or as a whole. Limitations include a focus on the Austrian market, examination of consumers as stakeholders with an emphasis on asset users, and limited attention to environmental factors such as legal issues.
T ABLE OF C ONTENTS
1 INTRODUCTION ... 1
1.1PROBLEM DEFINITION ... 1
1.2RESEARCH OBJECTIVES &RESEARCH QUESTIONS ... 3
1.3RELEVANCE ... 4
1.4DELIMITATION ... 5
2 THEORETICAL FOUNDATION ... 7
2.1INNOVATION & THE CHANGING CONSUMPTION LANDSCAPE ... 7
2.1.1 Innovation strategies ... 7
2.1.1.1 Disruptive innovation ... 8
2.1.1.1.1 Origin of disruption & criticism ... 8
2.1.1.1.2 Disruptive business model innovation ... 10
2.1.2 Network orchestrators ... 10
2.1.2.1 Functionality ... 11
2.1.2.2 Benefits ... 12
2.1.2.3 Importance of trust ... 13
2.1.2.4 Characteristics of successful platforms ... 14
2.1.3 A new economy ... 14
2.1.3.1 Concepts of access ... 14
2.1.3.2 Benefits involved ... 16
2.1.3.3 Disadvantages ... 16
2.1.3.4 Enablers of sharing ... 17
2.2PERSPECTIVE ON BRANDS IN THE NEW ENVIRONMENT ... 18
2.2.1 Digital brands ... 18
2.2.2 Shift in marketing ... 19
2.2.3 Service-dominant logic & brand value ... 20
2.2.4 Brands as social processes ... 22
2.2.5 Brand identity & image ... 23
2.2.6 Brand trust ... 23
2.2.7 Co-creation ... 25
2.2.7.1 Co-creation enablers ... 25
2.2.7.2 Benefits of co-creation ... 27
2.2.7.3 Co-creation processes ... 27
2.2.7.4 Customer engagement ... 27
2.2.7.5 Online participation ... 28
2.2.7.6 Brand engagement platforms ... 30
2.2.7.7 Customer engagement value ... 31
3 SCIENTIFIC METHOD ... 32
3.1THEORY OF SCIENCE ... 32
3.1.1 Ontology ... 32
3.1.2 Epistemology ... 33
3.1.3 Hermeneutics ... 33
3.1.4 Inductive reasoning ... 34
3.2METHODS OF DATA COLLECTION ... 35
3.2.1 Case study approach ... 35
3.2.2 Focus group ... 36
3.2.3 In-depth interviews ... 37
3.2.4 Netnographic study ... 38
3.2.5 Experts’ opinions ... 40
3.2.6 Note on data collection ... 40
3.3METHODS OF DATA ANALYSIS ... 41
3.4QUALITY OF RESEARCH ... 42
4 CASE INTRODUCTIONS ... 44
4.1AIRBNB ... 45
4.1.1 Historical overview ... 45
4.1.2 Functionality ... 46
4.1.3 Brand identity ... 47
4.1.4 Situation in Austria ... 47
4.2UBER ... 48
4.2.1 Historical overview ... 49
4.2.2 Functionality ... 49
4.2.3 Mission statement ... 50
4.2.4 Situation in Austria ... 50
5 KEY FINDINGS ... 52
5.1CONSUMERS, SERVICES & DIGITAL BRANDS ... 52
5.1.1 General decision criteria ... 52
5.1.2 Services decision criteria ... 52
5.1.3 Brand perceptions ... 53
5.2THE CONSUMER-BRAND RELATIONSHIP ... 54
5.2.1 Brand information ... 54
5.2.2 Social aspect ... 55
5.2.3 Trust ... 56
5.2.4 Communication & contact with the brand ... 57
5.2.4.1 General considerations ... 57
5.2.4.2 Preferred way of communication ... 58
5.2.4.3 Preferred response ... 59
5.2.4.4 Sharing ideas & suggestions ... 59
5.2.4.5 Motivation to share ideas & suggestions ... 60
5.3CONSUMERS, THE HOSPITALITY INDUSTRY &AIRBNB ... 61
5.3.1 Accommodation search ... 61
5.3.1.1 Information sources & search behavior ... 61
5.3.1.2 Accommodation choice criteria ... 62
5.3.1.3 Airbnb usage ... 62
5.3.1.4 Reasons for using competitors ... 63
5.3.2 Airbnb consumer perceptions ... 64
5.3.2.1 Competitive advantage ... 64
5.3.2.2 Brand associations ... 65
5.3.2.3 Adaptability, transparency & satisfaction ... 66
5.3.2.4 Disruption ... 67
5.3.2.5 Effect on housing market ... 67
5.3.2.6 Legal issues ... 67
5.3.3 Communication & contact with Airbnb ... 68
5.3.4 Airbnb social ... 68
5.3.5 Airbnb & trust ... 70
5.3.5.1 Trust towards hosts ... 70
5.3.5.2 Trust in brand ... 70
5.3.5.3 Breach of trust & effect on loyalty ... 71
5.3.5.4 Strengthening & regaining trust ... 72
5.4CONSUMERS, THE TAXI INDUSTRY &UBER ... 72
5.4.1 Consumer behavior ... 72
5.4.1.1 Taxi usage ... 72
5.4.1.2 Taxi apps & customization ... 73
5.4.1.3 Uber usage ... 73
5.4.1.4 Possible improvements ... 75
5.4.1.5 Reasons for using competitors ... 75
5.4.2 Uber consumer perceptions ... 76
5.4.2.1 Brand associations ... 76
5.4.2.2 Company mission ... 77
5.4.2.3 Negative associations ... 78
5.4.2.4 Security & reliability issues ... 79
5.4.2.5 Legal issues ... 80
5.4.2.6 Working conditions ... 80
5.4.2.7 UberEats ... 80
5.4.2.8 Disruption ... 81
5.4.3 Communication & contact with the brand ... 81
5.4.4 Social aspect ... 82
5.4.5 Uber & trust ... 83
5.4.5.1 Trust in brand ... 83
5.4.5.2 Trust - Uber vs. taxi ... 83
5.4.5.3 Breach of trust & effect on loyalty ... 84
5.4.5.4 Strengthening & regaining trust ... 84
6 DISCUSSION ... 85
6.1SERVICES IN GENERAL ... 85
6.2SERVICE-DOMINANT LOGIC AND EXPERIENCES ... 85
6.3SERVICES BRAND-RELATED ... 86
6.4DIGITAL BRANDS ... 87
6.5SHARING ECONOMIES ... 88
6.6NETWORK ORCHESTRATORS ... 88
6.7DISRUPTIVE EFFECTS ... 89
6.8IMAGE & IDENTITY ... 90
6.9TRUST IN BRAND ... 92
6.10PILLARS OF TRUST ... 93
6.11VALUE CO-CREATION PROCESSES & TRUST ... 94
6.12SOCIAL ASPECT ... 94
6.13ENGAGEMENT & PARTICIPATION ... 95
6.14ENCOURAGING ENGAGEMENT & PARTICIPATION ... 97
6.15BRAND ENGAGEMENT PLATFORMS ... 98
6.16CO-CREATION PROCESSES ... 99
6.17CO-CREATION EFFECTS ... 100
7 MANAGERIAL IMPLICATIONS ... 101
7.1GENERAL IMPLICATIONS ... 101
7.2IMPLICATIONS -AIRBNB ... 103
7.3IMPLICATIONS -UBER ... 105
7.4THEORETICAL IMPLICATIONS ... 106
8 CONCLUSION ... 108
8.1LIMITATIONS ... 108
8.2FUTURE RESEARCH ... 109
8.3CONCLUSION ... 110
9 REFERENCE LIST ... 112
10 APPENDICES ... 123
1 I NTRODUCTION
This introduction outlines the topic, discusses research objectives and questions as well as relevance, and provides a delimitation.
1.1 Problem Definition
A few years ago, it would have been unimaginable that the biggest brand in the accommodation industry would own no property and the world’s biggest taxi service company would own no single car (Hagel, Brown, Wooll & de Maar, 2016; McRae, 2015). Plus - these companies didn’t exist 20 years ago, yet now they are among the most valuable brands in the world (Sarwar, 2016). Having started business in 2008, Airbnb is currently active in 192 countries (Pickell, 2016). With a valuation of 30 billion USD, the brand is now worth around 30% more than the Hilton company, the world’s largest hotel chain. Additionally, Airbnb’s room inventory overtakes the three biggest hotel companies combined (Chafkin & Newcomer, 2016). Five years after launching, Uber was able to facilitate its one-billionth ride and is offering rides in over 450 cities around the world (Tepper, 2016).
These brands, referred to as network orchestrators, create a platform that allows consumers to interact and transact with other consumers that are part of the network (Libert, Wind & Beck, 2014). The company itself does not own any assets. Rather, consumers contribute intangible assets in the form of reviews and skills, and tangible assets such as homes or cars at almost no incremental cost. The company then orchestrates these assets (Libert, Wind & Beck, 2015). These brands make optimal use of network effects - where each participant increases the utility of the platform for all participants as a whole - by leveraging technology such as mobile pay, location- determining devices, allocating algorithms and real-time analytics (Hagel et al., 2016).
Their business model is based on the idea that there are private providers with assets that are able to satisfy a volatile consumer demand, however, these have not yet been commercially matched with buyers. By unlocking these assets, there is a wider choice of products and services that can be offered via a network platform and a better availability of these at competitive prices (Hagel et al., 2016). As a result, these
companies can focus on improving the network rather than on the management of owned assets, thus adding more value to the network itself. Additionally, consumers share personal information with the company. As the network is self-organizing, it adapts naturally to meet changing demand (Libert et al., 2015). These platforms are often classified as disruptive innovations (Shaughnessy, 2016) and at the basis of their model stands what has been termed ‘sharing economy’ (Oskam & Boswijk, 2016) or
‘people-to-people economy’ (Nurvala, 2015) which denote the aforementioned processes that are orchestrated via the platforms.
These platforms feed into a trend that goes beyond purchasing and consuming physical products or services. In today’s marketing environment, it is all about experiences; and the experience must be embedded in the consumer's’ social environment. There is a shift from a focus on objects over experiences to a transformational economy where meaning is crucial (Oskam & Boswijk, 2016). This shift in consumer mindset and behavior is important when examining network orchestrators, as these brands find themselves in an innovative consumer-brand relationship where traditional rules might no longer be applicable. In the case of these brands, a big portion of brand meaning and brand experience is beyond the brand’s control (Iglesias, Ind & Alfaro, 2013).
Besides the relationship with the platform, i.e. the brand, there is thus a social aspect represented by the relationships among consumers themselves. Brands are shaped by and in turn shape these processes (Iglesias et al., 2013). Consumers once had a relationship with a brand, now the brand is the relationship (Bonchek & France, 2016).
Additionally, in a digitalized world, it is all about trust (Mazzella, Sundararajan, D’Espous & Möhlmann, 2016; Goodwin, 2015). Given that previous research has denoted brands as important signals of trust (Benlamri & Sparer, 2017; Delgado- Ballester & Munuera-Alemán, 2005; Morrison & Firmstone, 2000), a valuable brand at the heart of a network orchestration business model is all the more important.
There is thus a new form of how consumers interact with the brand and with other consumers, and how value is co-created among them. Value co-creation can mean
consumers with the brand, consumers with other consumers within a brand context or the expansion of value by consumers and the brand; and is defined as the mutual development of value (Nysveen & Pedersen, 2014). Within a network orchestration context, co-creation leads to social and functional benefits for the company. Co- creation for consumers leads to economic, social, and functional benefits, among others. However, the ultimate value to be created lies in value that can be achieved by the brand (Piligrimiene, Dovaliene & Virvilaite, 2015). In addition to economic and functional value, it is thus crucial to examine how to create value that is centered on a strong brand.
1.2 Research Objectives & Research Questions
As network orchestrators are a relatively recent phenomenon, existing research has been focused primarily on examining the nature and effects of the business model itself. Research to date has situated these models within the context of collaborative consumption, the sharing economy and others. Mostly independently of each other, there is a different yet extensive stream of research focusing on consumer behavior and branding. The link between these two has been established with regards to brands in the form of ‘traditional’ goods and services, and with a recent focus on digital value creation via social media. However, the link between purely digital brands such as network orchestrators and insights about consumers and branding has not been created yet. This thesis thus attempts to create this missing link and to contribute to an understanding if and how the specific nature of consumer-brand interaction alters the rules of ‘traditional’ value creation and brand strategies. Specifically, the aim is to advance knowledge with regards to how these brands can make use of this new form of value co-creation with consumers in order to create a competitive advantage that is based on a strong brand. This thesis is focused on analyzing consumers (i.e. the platform users), the specific nature of the consumer-brand interaction and relationship and how co-creation can be used to create brand value and design brand strategy.
The research will be conducted with regards to Airbnb and Uber, since these platforms have been described as exemplary successes with a network orchestration business model (Gallagher, 2016).
To this end, the research question can be defined as follows:
How can digital brands make use of the new form of collaboration and co-creation with consumers to create and leverage sustainable brand value that will lead to competitive brand strategies in a digital environment?
In line with this, sub questions guiding the research are as follows:
What are the characteristics of network orchestration business models and their context?
How does branding change in a digital environment?
What are the prerequisites, influencers and processes of effective co-creation?
To answer these questions and gain decisive insights into the topic, existing literature and theory will be extensively reviewed as a first step. A focus will be put on network orchestrators and their disruptive effects, sharing economies, service-dominant logic of marketing, brand trust and consumer engagement, among others. With the theoretical insights providing a basis, an inductive research approach will help investigate the problem in question. With Airbnb and Uber as the chosen case studies, it is intended to discuss and interpret the findings and come up with valuable implications.
1.3 Relevance
Airbnb and Uber have been rather successful, and their success has been almost exclusively studied with regards to their innovative business models. Given the success achieved by these companies, more and more competitors trying to imitate are likely to emerge within a short period of time. Also, existing businesses might try to adapt their business models in favor of network orchestration. Competitors will attempt to provide the same benefits for a lower price or higher functionality, focusing primarily on the reasons consumers use these platforms (Wessel, 2016). Platform loyalty is therefore relatively low among network participants and brand switching is common and easy; as using any of such platforms involves no sign-up costs
(Addepalli, 2015.). As the originality of the business model wears off and with the significant and challenging change in competitive landscape just around the corner, competition will likely be elevated to a brand-based level. These brands cannot stop at being disruptive but need to go to the next stage – being productive (Martin & Todorov, 2016).
Additionally, digital relationships are all about trust and brands act as a signal that creates trust (Mazzella et al., 2016). Examining Airbnb and Uber and establishing a link between these platforms, consumer behavior and brand strategy to determine how brand value can be co-created and sustained will yield vital insights for these brands striving to survive in this new digital competitive environment. Relevant implications can be drawn as to how the creation of brand value and the subsequent design of brand strategies should be best approached within this changing environment and with an innovative business model as the foundation. These implications are insightful for Airbnb and Uber as well as other digital brands.
1.4 Delimitation
This paper is focused on examining two case studies, namely the network orchestrators Airbnb and Uber, with regards to asset users rather than asset providers (i.e. guests and riders as opposed to hosts and drivers). It focuses on consumers as key stakeholders, as consumers are indispensable to network orchestrators’ business models and regarded as the most important co-creators of value. Airbnb and Uber were chosen as two cases since these two brands have been recognized as prime successes of the peer-to-peer economy (Gallagher, 2016). Additionally, both operate in industries seemingly prone to the introduction of peer-to-peer platforms (Bachnik, 2016).
Furthermore, these two brands were considered valuable examples as they share the same business model, yet consumers’ decisions with regards to hospitality can be defined as high involvement (Bloemer & de Ruyter, 1999), whereas taxi services are here defined as low involvement service. It was thus assumed that consumer research taking into account this difference will yield interesting insights and possibly lead to
important implications for brand strategies. It should be noted that Airbnb and Uber might so far not have attracted users' attention because of the brand but rather because of the utility inherent in the business model. It might thus prove challenging to elicit consumer insights with regards to the brands themselves.
Additionally, this thesis is concentrated on examining the digital platforms mainly with regards to brand value, consumer behavior and co-creation. Legal issues and environmental circumstances such as competition will be given only limited attention as it would be beyond the scope of this thesis to take into account all the factors to the same extent.
Primarily, Millennials that were born during the 1980s and early 1990s (WebFinance Inc, 2017) are chosen as research participants. This is due to the fact that there is an existing generation gap especially in regards to technology (Ramasubbu, 2015). While it is true that these platforms might become increasingly popular among different generations, Millennials represent the most promising target group for the future (Mazzella et al., 2016). Younger adults as digital natives are more likely to use and embrace new technology that is the very base of the business models studied (Associated Press, 2009; Zickuhr, 2011). Furthermore, 24% of Millennials state that they find sharing concepts to be interesting (Bachnik, 2016). They are especially responsive to trying alternatives to traditional forms of possession and appreciate relationships, experiences and authentic brands (Head, 2013). It is therefore believed that focusing on Millennials in reference to network orchestrators will lead to the most valuable results.
Last, it should be noted that Airbnb and Uber might so far not have attracted users' attention because of the brand but rather because of the utility inherent in the business model. It might thus prove challenging to elicit consumer insights with regards to the brands themselves.
2 T HEORETICAL F OUNDATION
As mentioned in the introduction, the following theoretical foundation is roughly divided into two sections. First, information on innovation, network orchestrators and the changing consumption context will be given. This is followed by information on brands and consumers.
2.1 Innovation & the changing consumption landscape
The following section discusses innovation strategies with a focus on disruptive business models, and provides insights into network orchestrators and the sharing economies.
2.1.1 Innovation strategies
Realizing what customers need and want lies at the heart of almost every company.
Innovation starts where a need meets a technology that addresses said need, and where ideas are formed, screened, tested and so on (Paap & Katz, 2004). In changing times, innovation is key for a company to stay atop of their competitors and keep a competitive advantage (Paap & Katz, 2004). However, frequently companies that show innovative initiatives fail, and those who are fruitful have trouble sustaining their success (Pisano, 2015).
The failure of leading established companies is usually not due to radical technological changes but because companies aiming to innovate do not want to risk alienating their existing customer base by altering their offerings and tend to be too late in adapting their business strategy to changes (Bower & Christensen, 1995). Some companies fail to realize changes in technology, or don’t notice changing consumer behavior or market conditions at all (Paap & Katz, 2004).
In order for an innovation strategy to be successful and robust, it needs to solve the question of how the innovation will create value for the consumer (Pisano, 2015).
Innovation is creating value if customers are enticed to pay a higher price, if it saves
consumers money, or if there is a larger societal benefit provided (ibid.). As value creation attracts competitors, complementary assets, capabilities, products or services could prevent customers from switching and provide a competitive advantage (Pisano, 2015).
According to Pisano (2015) there are four types of innovation that allow a company to create value for its customers: routine, disruptive, radical, and architectural. Routine builds on existing competences in an existing business model. Disruptive innovation involves a new business model but no new technology. Radical innovation is purely technological, and architectural is a combination of technological and business model changes (Pisano, 2015).
Quite recently, disruptive innovation has gained a lot of attention and a large number of corporations have been named disruptors by introducing business model innovations, such as Netflix, Amazon, or Uber (Pisano, 2015). These new business models have disrupted entire industries (Johnson, Christensen & Kagermann, 2008) and will be inspected more closely in the following section.
2.1.1.1 Disruptive innovation
Disruption allows to attack industries from different angles; new opportunities are emerging (Wessel, 2006). Startups are often driven by the desire to solve a previously unsolved problem, thus being disruptive as the problem is solved in a unique way while creating new value (Choudary, 2013). However, the original disruptive innovation idea introduced by Christensen has often been criticized and needs to be taken under scrutiny.
2.1.1.1.1 Origin of disruption & criticism
Disruption, as viewed by Christensen, Raynor and McDonald (2015), is “a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses” (p.46). The incumbent’s focus is on providing products for the most profitable customer segment while ignoring lower-end needs. A new entrant delivers a more-suitable functionality to the lower-end segment and moves
upmarket. The incumbent’s share is in danger as mainstream customers will likely choose the new entrant’s offerings (ibid.).
It is argued that the original idea of disruption only included disruptive technologies, and was later widened to products and business models. Markides (2006) suggests a finer categorization and highlights that those different types are disruptive to incumbents, but treating them as the same would be confusing and misleading as their origin, development and effect are different from each other. Disruptive radical innovations introduce new products and value propositions that lead to a change in consumer behavior (ibid.). A disruptive business model innovator redefines existing services or products and their provision to the customer, a fundamentally different business model is discovered and established (ibid.). By doing so, new customers are attracted to the market or existing customers are encouraged to increase consumption (ibid.). Markides (2006) notes that a new business model does not necessarily have to be superior to the incumbent’s one, therefore, it is also not the optimal strategy for every company in the market.
Wessel (2016) argues that disruptive innovation does not necessarily have to start in the low-end market, but that it is merely a by-product. Yu and Hang (2009) try to clarify misunderstandings by arguing that disruption represents a relative phenomenon which is not equal to destructive innovation, and that it does thus not automatically lead to replacement of incumbents or traditional businesses.
Schmidt and Druehl (2008) summarize this discussion: “a disruptive innovation is not necessarily a disruptive innovation” (p.348). This implies that an innovation that dramatically disrupts a market is not necessarily the same type of innovation that Christensen intended the terminology to be used for. For this thesis, it is deemed more appropriate to look at disruption as Paap and Katz (2004) view it, namely as a description of how some industries are affected by technology-based innovations and how certain companies are unable to cope because of their lack of knowledge of the new disruptive technologies.
2.1.1.1.2 Disruptive business model innovation
In general, a business model involves four intertwined components that together create and deliver value (Johnson et al., 2008). These are the customer value proposition, a profit formula, key resources such as people, technology, equipment, and key processes (ibid.).
From a consumer perspective, disruptive innovation usually follows an approach that makes consumption easier and offerings more affordable and more accessible (Wessel, 2006; Anthony, 2014). Business model innovation and new technologies lead to structural cost advantages for disruptors (Wessel, 2006). For an innovator, the development of a behind-the-scenes advantage is important; an innovative business model that makes it possible to keep costs radically low while scaling up would be an example (Anthony, 2014). In addition, a disruptive business model takes advantage of the ‘asymmetries of motivation’, which implies that it attacks markets in which incumbents ignore unprofitable or seemingly small segments by establishing a model that provides a competitive advantage (ibid.).
2.1.2 Network orchestrators
Libert and colleagues (2014) argue that there are four types of business models: asset builders, service providers, technology creators, and network orchestrators. Quite recently, the last of the four has gained much attention as they have been named in connection to the disruptors who influence, challenge, and change whole industries.
With the rise of the digital era, the focus has been on technology, but new organizational forms create a new source of disruptive innovation, introducing a new way of how activities that create value can be organized (Shaughnessy, 2016). The discovery of previously non-network-friendly industries such as the automobile business as new potential markets has been another reason why network orchestrators like Uber gained much attention (Addepalli, 2015). Companies like Uber, Airbnb and Facebook are examples of such platforms that have successfully managed a commercial digital network which assists interactions between companies and customers (Shaughnessy, 2016).
2.1.2.1 Functionality
Network orchestrators create a network of peers in which interaction, sharing, and value creation among the participants is enabled (Libert et al., 2014). These network orchestrators are pure matchmakers, enabling the provider and buyer to discover each other and make a transaction (Addepalli, 2015). As long as the companies allow it, providers and buyers can both freely interact with each other and move around on the platform (Van Heck & Harvest, 2007).
Shaughnessy (2016, p.7) suggests elements that are of great importance for this platform model: ecosystems that are innovative, open application programming interfaces which allow new types of collaboration, network effects achieved by exponential growth, and two-sided markets. In principle, a platform is the facilitator of a relationship between two or more sides of a market, thus making it at least two-sided (ibid.). Worth noting is the increasing focus on how to leverage assets of other people, during a time in which return on assets is steadily declining (ibid.).
By putting the focus on customer service and value network as opposed to asset ownership, network orchestrators can unlock “adjacent assets at minimal marginal cost and achieve critical mass quickly” (Hagel et al., 2015, p.2). The orchestrators are able to better meet the volatile demand because of the provision of access to suppliers’
assets, increasingly satisfying customer preferences (ibid.).
Libert and colleagues (2014) point out that network orchestrators have higher valuations relative to their revenue, and enjoy faster growth and larger profit margins, hence creating more value and outperforming companies with other business models.
Despite that, only a relatively low percentage of companies have a network orchestrator business model, which is assumed to be because of the requirement of new technologies, different asset allocation, standard industry designations, and the effort that is involved in changing business models (ibid.).
2.1.2.2 Benefits
From a customer viewpoint, there is a better availability, greater choice and wider price range of products and services (Hagel et al., 2015). Fewer direct costs are involved in the network, and deployment of products and services can happen at a minimal incremental cost (ibid.), making them more affordable. For the network operator itself, significant economic value can be created by leveraging network effects which reduces capital costs, limits investment in fixed assets, and involves a diffusion of risk among the great amount of participants (ibid.). For the owners of assets, value is created as well. The network operator is inclined to create enough “value for the potentially non- commercial asset owners to participate in the network” so the network reaches a critical mass (Hagel et al., 2015, p.4). This critical mass in turn leads to a greater choice for customers and a risk aversion in times of spikes in demand (ibid.). In addition, additional income for underutilized assets can be earned by the provider (Nurvala, 2015).
However, it is suggested that network orchestrators should widen their horizon from seeing the platform as a pure matchmaker and increase their investment in new value creation by empowering users (Van Alstyne & Schrage, 2015).
As already mentioned, the parties involved benefit the greater the number of participants in the network. This network effect takes place when the platform is able to grow the number of users, in turn making the platform more useful to them (Van Heck & Harvest, 2007). A strong, vibrant network will to some extent prohibit users from switching to other platforms (ibid.), thus somewhat protecting the platform itself via the network effects once established (Edelman, 2015). A platform should therefore increasingly invest in capabilities that enable fast, simple and easy user value creation (Van Alstyne & Schrage, 2015). Mobile phone systems, location-tracking devices, social networks, messaging apps and other technologies are an effective way of fostering platforms, enabling unusual scale of networks (Van Heck & Harvest, 2007;
Shaughnessy, 2016).
However, facilitating communication among participants and having enough users is not the sole ingredient to a successful platform. The network must be able to further lock in its users and prevent switching (platformthinkinglabs.com, 2015). It is suggested to make use of the stored value that is creative content, reputation, usage data, and influence (ibid.). Another important factor is trust and the platform’s reputation which are built directly on the platform, eg. via a review system, thus increasing the value for everyone involved (ibid.).
2.1.2.3 Importance of trust
Especially in the online world, trust is of vital importance to a company (Durkan, Durkan
& Gillen, 2003). Despite the increasing importance, rapid growth and many potential benefits that are involved when it comes to the online world, consumers are still skeptical and do not easily trust e-commerce platforms (ibid.). This fear or anxiety to trust companies online is concerned with issues of security and not the missing of physical face-to-face contact (ibid.).
For a network orchestrator, the management of trust between the parties involved is vital if the company wants to successfully leverage network effects (Shaughnessy, 2016). Durkan and colleagues (2003) suggest that in order to establish trust online, it is advised to provide contact details, especially a phone number so customers can directly speak to a responsible person, photos of employees, and testimonials from other consumers, among others.
Collaborating partners who are part of the network need to be able to communicate with each other and thus build trust (Möhlmann, 2015). Trust is an important factor that determines whether a consumer is satisfied with the platform (ibid.). This online trust is usually built over time, and a purchase or use that was satisfactory to the consumer will make a contribution to the incremental trust building process (Durkan et al., 2003).
To make sure that consumers are satisfied and that trust is built, a platform needs to assure that the service or product offered is of consistent high quality (ibid.).
2.1.2.4 Characteristics of successful platforms
Shaughnessy (2016) suggests that there are five characteristics that a manager can capitalize on in order to create a successful platform strategy. The first is to look for creating new franchises around asset leverage, which often involves the complete renewal of the franchise as it was the case of Apple or Google (ibid.). Second, platforms are huge transaction engines by cataloging availability of assets, storing them, sharing sales information as well as distributing it (ibid.). Third, the ecosystems enable management of the external environment and advocacy, supported by the often superior design and processes (ibid.). Fourth, network orchestrators usually break the scale barrier by implementing perpetual innovation focused on customer value at a low cost while network expansion happens. Last, those companies do not shy away from taking a step away from their core competency, thus “breaking with old ideas” (ibid., p.11). Uber, for example, has taken a step from passenger transportation to logistics (Sampere, 2015).
2.1.3 A new economy
Network orchestrators specialize in the provision of access to assets, converting underutilized goods or services into more valuable ones (Smith, 2016). Accessing instead of owning assets provides economic benefits to the individual; environmental and community-related benefits are involved as well (Belk, 2014). There seems to be a growing trend into owning less; and the ‘minimalist’ movement is thriving, enabled by the digital era and the sharing economies (Marr, 2016). Collaborative consumption, sharing economy, and peer-to-peer economy are terms used in connection with network orchestrators. However, there is some confusion about the terms, which is why they require a distinction. Furthermore, the reasons for the growing trend to move from owning assets to sharing or lending assets as well as the benefits and downsides of the sharing economies will be discussed in the next section.
2.1.3.1 Concepts of access
The sharing economy refers to a system that focuses on monetizing underutilized assets such as cars or accommodations, without purchasing them. It instead focuses on borrowing or renting in exchange for access or money (PricewaterhouseCoopers
LLP, 2015). This is opposed to maximizing output or consumption, and instead puts the focus on underutilized assets and resources (del Rowe, 2016). Trust, collaboration, and on-demand services or goods are important factors of this emergent ecosystem (PricewaterhouseCoopers LLP, 2015). Nurvala (2015) highlights that in the sharing economy, people actually share property rights over products. According to studies, 44% of the US adult population are aware of the concept, and 19% of U.S. adults have already given it a try (PricewaterhouseCoopers LLP, 2015). As already mentioned, trust is of vital importance to online platforms, and works as a base for sharing economies (ibid.). Trust between the provider and obtainer, and peer-to-peer interaction are characteristics of the following models (del Rowe, 2016).
Collaborative consumption is concerned with people who coordinate the purchase and distribution of an asset in exchange for a fee or other compensation (Belk, 2014). This enables individuals to obtain as well as provide a resource or service “through direct interaction with other consumers or through the mediation of a third-party” (Ertz, Durif
& Arcand, 2016, p.1). A provider can switch to become an obtainer and vice versa, and this exchange does not necessarily have to involve compensation or transfer of ownership (ibid.).
A peer-to-peer economy means that advantage is taken of the reduction of transaction costs and services are produced “in a diffuse matter” (Nurvala, 2015, p.232). Guttentag (2013) refers to Airbnb as an example of the peer-to-peer economy, as it is an online marketplace that provides large-scale rental of accommodations from one person to another. Nurvala (2015) highlights that in a peer-to-peer economy, the provider of the service or product is a self-employed entrepreneur who is connected via the matchmaking platform to a consumer who is seeking the service or product. This would make a classical B2C transaction, but transaction costs which are the information, bargaining, and enforcement costs, are drastically reduced with the use of the Internet as well as the platform (ibid.). The new peer-to-peer economy also enables a decrease in asymmetry of information with the help of a peer-review system, as it took a lot of time and effort for consumers to find necessary information (ibid.).
As can be seen, the terms are overlapping and describe rather similar economies, if not the same. For the purpose of this study, it was decided to not be too specific on which term should actually be used, and under which term such platforms are in general categorized, as a denomination might “obscure their true nature” (Oskam &
Boswijk, 2016, p.22). It is, however, noted that Uber and Airbnb have previously been named in all the categories explained above (see PricewaterhouseCoopers LLP, 2015;
Nurvala, 2015; Guttentag, 2013; Marr, 2016; Oskam & Boswijk, 2016).
2.1.3.2 Benefits involved
Accessing assets instead of owning them involves benefits such as attractive costs, a sense of community, and an ability to alleviate burdens (PricewaterhouseCoopers LLP, 2015). The sharing economy involves price advantages, environmental sustainability and new consumption experiences (Kathan, Matzler & Veider, 2016); all factors that are of seemingly great importance to the consumer of today. According to a PwC study from 2015, 86% of the consumers agreed that life is more affordable through sharing, 78% of the respondents stated that sharing increases the sense of community, and 83% said that the sharing economy has made their lives more efficient and more convenient as owning assets felt like a burden to them. A more competitive market and a more efficient use of existing assets will further lead to gains of the sharing economies (Nurvala, 2015). In addition, it enables many people to work on their own time and on their own terms (PricewaterhouseCoopers LLP, 2015), giving jobs to low- skilled or unskilled workers (Nurvala, 2015).
2.1.3.3 Disadvantages
Despite the advantages that transaction costs are reduced and the chance of part-time work or additional wage that is earned for underutilized assets (Nurvala, 2015), the sharing economies also involve negative effects.
Some are in fear of the future of their professions and the impact the sharing economies have on the labor force; a greater reliance on welfare is expected (PricewaterhouseCoopers LLP, 2015). Only short-term expenses are usually covered, and as the providers are usually independent contractors, they do not get social benefits from the company (Kathan, et al., 2016). In addition, it has been made easier
to access a pool of highly skilled people online, so an individual can lose the competitive advantage on the market (Kathan et al., 2016).
2.1.3.4 Enablers of sharing
There is a new way of consuming, a change of consumer-mindset, giving rise of the sharing economies (Miller, 2014). Consumers started to realize that the true value does not lie in owning tangibles but instead in cultural resources and experiences (Bachnik, 2016; Miller, 2014). With the rise of the social web individuals became empowered by being more interactive and connected, participating in more intangible matters (Bachnik, 2016). It is argued that the sharing economy has always existed, but with changing technologies and the Internet it has been made easier for strangers to become involved (Miller, 2014).
Society is changing, and this is due to innovations of technological nature, and sociological, philosophical and economic factors (Oskam & Boswijk, 2016). Growth of technological innovations is exponential and the previously physical world is digital, thus influencing the lives of everyone and how society is organized (ibid.). Society moved from a focus on asset ownership to an experience economy, and to a transformational economy where the focus lies on self-actualization and searching for the meaning of life (ibid.). This will be explained in greater detail within the brands and consumers section. Looking at this change from a business perspective, there was a move from mass production to knowledge platforms and value networks (Oskam &
Boswijk, 2016). From a philosophical viewpoint, creativity and self-determination by consumers have become more important for the individual being (Boswijk, 2013). Last, the economy is dematerializing, implying that there is a switch from agriculture and industrial production to services that provide experiences and meaning to customers (Oskam & Boswijk, 2016). This is expressed in digitalization, eco-efficiency, and intangible consumption aspects (ibid.). These changes give rise to value networks, in which the customer becomes powerful and is in charge of his own value chain (ibid.).
Other factors such as global warming, increasing prices of fuel and raw materials, environmental factors such as growing pollution, and other trends further stimulate
sharing and collaborative consumption (Belk, 2014). Other reasons for the rise of the sharing economies include a change in consumer behavior and the financial crisis of 2008 (del Rowe, 2016; PricewaterhouseCoopers LLP, 2015).
2.2 Perspective on brands in the new environment
The following section provides an overview of branding in a new environment, with a focus on digital brands, service-dominant logic of marketing, the social aspect of brands, brand trust and a detailed discussion on co-creation.
2.2.1 Digital brands
Digital, also called online brands, can be defined as traditional “offline” brands, with the characteristic that they meet consumer needs via augmented interaction in an environment mediated by technology (Hoffman & Novak, 1996). As a digital context is information-heavy, fast-paced, dynamic (Helm, 2007) and lacks physical elements, uncertainty and intangibility are palpable (Kollman & Suckow, 2008). The basic notion of branding is the same, in that a digital brand is a symbol equipped with a personality that distinguishes it from competitors (Morgan-Thomas & Veloutsou, 2013) and is a service or a product, and not just technology (Song, Zhang, Xu & Huang, 2010). A brand stays a brand, however, a looser way of management and brand building, and interactions are characteristic of digital brands (de Chernatony, 2001). Christodoulides and colleagues (2006) note that technology offers new ways of creating brand equity.
Digital brand equity can be defined as the value that is created when brands and users co-create through interactions (Christodoulides, 2006).
Users experience and come into contact with digital brands differently (Hoffman &
Novak, 1996). There is a two-way interaction between users and the brand, keeping consumers engaged and leading to positive experiences. These create a sustainable relationship with the brand and a connection to other users (Moynagh & Worsley, 2002). Thus, constant interaction is a digital brand’s greatest asset and key to success (Song et al., 2010). Experiences also create emotional benefits such as enjoyment.
Functionality and emotional benefits together make up the online brand experience,
which influences satisfaction (Morgan-Thomas & Veloutsou, 2013). As functionality is a very basic requirement for satisfaction that can easily be imitated, basing a digital brand on emotional ties and relationships is crucial (Kollman & Suckow, 2008). In general, an experiential user-interface, consumer engagement, community, reliability and credibility, trust and consumer service are among the central parts important to a digital brand (Nandan, 2005).
Physical brands have been identified as “point solutions” by Dayal, Landesberg and Zeisser (2000), in that they solve part of a need primarily via functionality. They state that digital brands must provide more benefits and create holistic experiences that become the brand. A digital brand has to be centered on a central promise, for example convenience - making something faster, cheaper and easier. Digital brands must better deliver on these promises, as switching to competitors is easy (ibid.). According to the authors, this promise must then be executed in the form of interfaces and functions to create the user experience, consisting of tools allowing for convenience and personalization, cooperation tools creating community and dynamic pricing tools that allow for adjustment. Furthermore, Nandan (2005) states that a sustainable business model, which cannot be easily imitated, is crucial.
Brand trust in a digital environment is influenced by interface factors, security and risk, experience, brand name, word of mouth (recommendations) and quality of information, among others (Alam & Yasin, 2010).
2.2.2 Shift in marketing
Three forces gave rise to the changed situation in today’s marketing environment. As mentioned, technological advancements have given consumers more power, the possibility to connect with other consumers and to establish communities that transcend the boundaries of time and space. Second, marketers and managers have recognized the value inherent in consumers (Ind, Iglesias & Schultz, 2013). A company-centric perspective has thus been replaced by a customer-centric perspective (Nysveen & Pederseen, 2014), which in turn has been replaced with a customer-driven perspective (Merrilees, 2016). Rather than viewing companies and
their brands as consisting of different organizational units, companies and brands are seen as outcomes of synergy of various competences (Prahalad & Ramaswamy, 2000). These competences often lie outside of the company and in the hands of stakeholders. Stakeholders feed into the competences available to a company, thus making the organization into an ‘extended enterprise’ (ibid.). With regards to consumers as stakeholders, consumer competence can be defined as the sum of consumers’ knowledge, skills and resources at their disposal (ibid.). Third, there has been a shift from a focus on tangible goods, where exchange of value was linked to physical products (Vargo & Lusch, 2004), to an environment where services and experiences are crucial (Ind et al., 2013). As mentioned previously, there has been a shift to a transformational economy where meaning and knowledge are important (Oskam & Boswijk, 2016). Services are now the main means of valuable economic exchange, highlighting intangibles such as experiences, relationships, processes, knowledge and skills (Vargo & Lusch, 2004).
2.2.3 Service-dominant logic & brand value
Services are viewed as a perspective on value generation, whereby value is regarded from a consumer’s perspective (Edvardsson, Gustafsson & Roos, 2005). They can be defined as the utilization of knowledge and skills with the aim to provide a benefit for another party or one’s own party (Merz, He & Vargo, 2009). A service brand offers a specific service that is of value; whereby the value can be derived from a physical product or a real service, according to Vargo and Lusch (2004). This means that in the case of physical products, tangible goods are not bought primarily for tangible benefits such as functionality etc., but for the service and the experience they provide (ibid.). It should be noted that for the purpose of this paper, brands can be defined as allocation of functional and emotional qualities that together create a unique experience (de Chernatony, 2006). Value is therefore not seen as a result of a product or a brand itself, but as a result of what benefits come from using it (Vargo & Lusch, 2008). This is emphasized in a new stream of marketing termed service-dominant logic. Brand value can here be defined as value that is derived from experiencing and using a product, i.e. value-in-use (Vargo & Lusch, 2004). Value-in-use can then be taken one
step further, in defining value as value-in-experience (Helkkula, Kelleher & Pihlström, 2012).
Both the consumers as well as the company are seen as providers of resources that together create value (Merz et al., 2009). Brands can in turn be seen as a potential source to create value (Hilton, Hughes & Chalcraft, 2012). Companies may only offer brands in the form of value proposition, in order for value to be realized, consumers must act as co-creators (Vargo and Lusch, 2008). Thus, both parties must bring in their resources; when these resources get integrated they are transformed into an experience, i.e. a service. The party using the service, i.e. the consumer, can then evaluate the value deriving from this service (Hilton et al., 2012). The company thus primarily acts as a facilitator in that it offers consumers services that facilitate consumers’ own value creation processes. It places itself within the value fulfillment process and interacts with consumers, thus creating brand value with consumers together (Grönroos, 2008). This process has influence on how actors will react to value propositions in the future (Hilton et al., 2012).
Consumers attach meaning to a brand via their lived experiences (Baker, Jensen &
Kolb, 2005). These experiences are increasingly beyond the brand’s control and are developed via the interfaces consumers use to interact with the brand, from physical stores over employees to a website (Iglesias et al., 2013). All these experiences and interactions create brand value, shape brand identity and foster trust (ibid.). As Prahalad and Ramaswamy (2004) put it, ‘the experience is the brand’. As a result, brand meaning is derived not from a specific product but rather from the organization as a whole, which means that the firm becomes the brand (Davis, Buchanan-Oliver &
Brodie, 2000). The relationship with the company brand is built on an image derived from experiences with the company, promises that are centered on the service and trust that comes from the consumer-company brand relationship (ibid.).
In today’s marketplace, brands are thus not static and largely determined by the company, but rather evolve along with consumer experiences, state Ramaswamy and Ozcan (2016). They argue that brand value is all about experiences that are co-
created, which in turn produce mutual value. Consumers can be viewed as agents;
they engage and act with the aim to experience different things, which places them in relation within their social and cultural environments (ibid.). There is thus a shift from an enterprise view over a customer view to a relational and agential view of brands, where value is jointly created and ultimately results in a flexible and mutually shaped brand (ibid.). This means that a brand no longer has control over every aspect of itself and that brand meaning and brand value are created collaboratively (Iglesias et al., 2013). As a result, traditional brand management and brand strategies are altered (ibid.).
2.2.4 Brands as social processes
Brands can be seen as social constructs that encompass a symbolic character for socialization (Schembri, 2009). This means that brands are shaped by and in turn shape social processes. Brands are viewed as organic entities that develop dynamically via social processes that multiple stakeholders are engaged in (Ind et al., 2013). These processes have been researched within what has been termed
‘stakeholder-focus brand era’, which focuses on brands as processes rather than identifiers, symbolic pictures or promises (Merz et al., 2009). Consumers and brands find themselves in social relationships centered on networking, rather than dyadic ones as before (ibid.).
Previously, a brand was something consumers had a relationship with (Fournier, 1998). In today’s world, brands are the embodiment of a relationship, as stated by Bonchek and France (2016). According to the authors, in a competitive brand landscape shaped by experiences and services, a brand is something that is delivered within a certain moment. Now a brand stands in for a relationship between consumers and is no longer determined purely by one-sided marketing communication, but rather shaped by mutual dialog and communication between involved parties (ibid.). The most important pillars of these relationships are trust, engagement and customer satisfaction (Hajli, Shanmugam, Papagiannidis, Zahay & Richard; 2017).
2.2.5 Brand identity & image
Whereas previously scholars have argued that the identity of a brand should be something fixed and internally determined by managers, the present state of branding sheds a new light on this discussion. Consumers feed into what the brand means and shape identity externally, according to da Silveira, Lages and Simões (2013). They form individual and communal identities and these identities are then transferred to the brand via interactions and experiences with the brand, be it in the form of advertising (with a brand as the initiator) or blogs and reviews (consumers as initiators) (ibid.).
Thus, as viewed by the researchers, brand identity is a dynamic concept in which core values remain stable but allow for adaptation to both internal as well as external influences. Identity is therefore constructed by means of internal information communicated by the brand and via consumers as external sources (ibid.). Overall, environmental factors such as the competition and other stakeholders may also contribute to shaping identity (ibid.).
Brand image can be defined as the impression consumers have about the functional as well as symbolic characteristics of a brand (Low & Lamb, 2000). Brodie, Whittome and Brush (2009) state that in this new environment, impressions of image, as well as impressions of company image and trust in both the company’s management and its employees influence the perceived value of an offer. Positive impressions of value in turn have a positive influence on consumer loyalty (Brodie et al., 2009).
2.2.6 Brand trust
In line with the focus on experiences and relationships, research views brand equity as being inherent in the relationships a brand has with its consumers (Ambler, 1997).
In order to allow for a stable relationship, trust is crucial, as stated by Delgado-Ballester and Munuera-Alemán (2005). Trust positively influences brand loyalty, which in turn influences brand equity (ibid.). They define brand trust as consumers’ expectations towards the perceived result of using a brand, and it has two dimensions: a technical and an intentional dimension. Within the technical dimension, consumers have trust that the brand will be competent and comply with what it promised (ibid.). The intentional dimension describes to what extent consumers ascribe good intentions to
the brand, for example when they make a negative experience with a brand (ibid.).
According to the authors, a brand that consumers trust can be defined as one that is reliable, consistent in keeping its promises and ready to assist the consumer in case of a problem. While trust is made up of all the previous interactions consumers have had with a brand so far (for example directly during usage or trial, and indirectly in the form of word-of-mouth and advertising), consumption experiences themselves influence trust the most (ibid.). This is due to the fact that associations and beliefs created during consumption or use are held most strongly and show the highest relevance for the individual, as stated by the researchers. They argue that the more positive experiences with the brand, the more trust can be established. In order to foster trust, a brand has to be designed to create positive experiences (ibid.).
Positioning a brand on its capability to fulfill consumer expectations towards its promise will allow for the creation of brand equity that is based on a trustworthy relationship (ibid.).
A brand name can thus act as a signal of trust, by using it as an assurance for fulfilling the expectations created among consumers (Randall, 1997). It can act as a symbol that reduces uncertainty and risk and builds credibility in a situation of asymmetrical and incomplete information (Herbig & Milewicz, 1993). It enables action when consumers would otherwise hesitate through minimizing the chance of disappointment and information overload (ibid.).
Brands nevertheless can be viewed as ‘summarized knowledge’, as Morrison and Firmstone state (2000). According to them, the most important pillars of brand trust are reputation (by replacing missing information, e.g. information that only becomes available after having signed a contract or performance that can only be determined after purchase), familiarity (including a personal component, e.g. trust that is created by personal interactions with service personnel), performance (previous satisfactory brand experiences lead to consumer action without conscious thought, performance thus becomes a habit) and accountability (meaning that promised performance and solutions as a result of eventual non-performance can be enforced). Research has
also shown that trust-established brands can afford a mishap and that they have high chances of being given a second chance (Harvin, 2000).
When it comes to the online world, trust is all the more important. In a situation where personal contacts have been replaced by virtual relationships, brands as signals of trust establish a certain level of assurance (Durkan et al., 2003). In order to create trust online, a brand has to connect with consumers on a more emotional basis (Wyatt, 2000 in Durkan et al., 2003). However, it should also be noted that the changed technological environment enables consumers to easily receive trustworthy information from independent sources other than the brand, which somewhat contributes to a decrease in the importance of brands as signals of trust (Nurvala, 2015). Research has also shown that consumers tend to be more trusting towards brands that have already established an offline presence (Harvin, 2000). Additionally, their willingness to try new things that come from established offline brands is greater than the willingness to try pure online brands (ibid.). In other words, trust that has been established in the physical world can be transferred to an online environment (Morrison
& Firmstone, 2000).
2.2.7 Co-creation
Co-creation, consisting of interaction, experiences and relationships, is regarded as essential feature that characterizes services (Edvardsson et al., 2005). It is defined as the mutual development of value between consumers and brands, as well as development of value among consumers within a brand context (Nysveen & Pedersen, 2014). The hereby created value is applicable not only to consumers co-creating actively, but for other consumers as well (Ind et al., 2013). Co-creation experiences are the basis of building a brand (Ramaswamy & Ozcan, 2016).
2.2.7.1 Co-creation enablers
Three important occurrences enable co-creation activities, as stated by Payne, Storbacka and Frow (2008). The researchers describe them as follows. As mentioned previously, advancements in technology bring about new ways of connecting with consumers. Second, an increasingly dynamic industry environment leads industries to change and converge, eradicating traditional industry outlines and creating new
