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Surge pricing is a variant of dynamic pricing (also known as variable pricing). The dynamics of prices means that prices can now change much more frequently and vary across customers, time and place at ever higher resolution; a price surge or hike at peak moments in demand can be described as an outcome of dynamic pricing. Surge pricing received great attention due to Uber’s application of this strategy, and not least because of the controversial way that Uber implemented it. But dynamic pricing, and surge pricing within it, is a growing field with various forms of applications in different domains.

A price surge is generally attributed to a surge in demand. In the case of Uber, when the number of customer requests for rides (‘hailing’) critically exceeds the number of drivers available in a given geographic area, Uber enforces a ‘surge multiplier’ of the normal (relatively low) price or tariff (e.g., two times the normal price). The multiplier remains in effect for a period of time until demand can be reasonably met. The advantages, as explained by Uber, are that through this price treatment (1) drivers can be encouraged to join the pool of active drivers (i.e., ready to receive requests on Uber app), as well as  pulling drivers from adjacent areas; and (2) priority can be given to a smaller group of those customers who are in greater need of prompt service and are willing to pay the higher price. Consequently, waiting times for customers willing to pay the price premium will be shorter.  (Note: Lyft is applying a similar approach.)

There are some noteworthy aspects to the modern surge pricing. A basic tenet of economic theory says that when demand surpasses the supply of a good or service, its price will rise until a match is reached between the levels of demand and supply so as to ‘clear the market’. Yet the neo-classic economic theory also assumes that the equilibrium price applies to all consumers (and suppliers) in the market for a length of time that the stable equilibrium prevails; it does not account well for temporary ‘shocks’. Proponents of surge pricing argue that this pricing strategy is an appropriate correction to a market failure caused by short-term ‘shocks’ due to unusual events in particular places. There is room in economic theory for more complex situations that allow for price differentials such as seasonality effects or gaps between geographic regions (e.g., urban versus rural, central versus peripheral). Still, seasonal prices are the same “across-the-board” for all; and regions of different geographic markets are usually well separated. On the other hand, in surge pricing, and in dynamic pricing more broadly, it is possible through advanced technology to isolate and fit a price to a very specific group of consumers in a given time and space.

One of the concerns with surge pricing in ride e-hailing is that the method could take advantage of consumers-riders when they have little choice, cannot afford to wait too long (e.g., hurry to get to a meeting or to the airport) or cannot afford a price several times higher than normal (e.g., multipliers of more than 5x). The problem becomes more acute as surge pricing seems to ‘kick in’ at worst times for riders, when they are in distress [1a](e.g., in heavy rain, late at night after a party). The method seems to screen potential riders not based on how badly they need the service but on how much they are willing to pay. The method may fix a problem for the service platform provider more than for its customers. Suppose hundreds of people are coming out at the same time from a hall after a live music concert. If the surge multiplier shown in the app at the time the prospect rider wants to be driven home is too high because of the emerging peak in demand, he or she is advised to wait somewhat longer until it slides down again. How long should riders wait for the multiplier to come down? Often enough, so it is reported, it takes just a few minutes (e.g., minor traffic fluctuations). But in more stubborn situations the rider may be able to catch a standard taxi by the time the multiplier declines, or if the weather permits, walk some distance where one can hail a taxi or get onto another mode of public transport.

Another pitfall is reduced predictability of the occurrence of surge pricing. Consumers know when seasons start and end and can learn when to expect lower and higher prices  accordingly (though it used to be easier thirty years ago). In public transport, peak hours (e.g., morning, afternoon) are usually declared in advance, wherein  travel tariffs could be elevated during those periods. Since surge pricing is based on real-time information available to the service platform provider, it is harder to predict the occasions when surge pricing will be activated, and furthermore the extent of price increase. Relatedly, drastic price changes (e.g., due to high frequency of updates, strong fluctuations) tends to increase the uncertainty for service users [1b].

The extent of price surge or hike is a particular source of confusion. Users are notified before hailing a Uber driver if surge is on, and a surge multiplier in effect at that time should appear on the screen. The multiplier keeps being updated on the platform. It is sensible, however, for the multiplier to stay fixed for an individual rider after the service is ordered. Thus the rider can make a decision based on a known price level for the duration of the ride (or an estimate of the cost to expect). Otherwise, the rider may be exposed to a rising price rate while being driven to destination — but the rider should also benefit if the multiplier starts to slide down (or entering another area where surge is off). The first scenario resembles more a situation of bidding whereas the latter scenario looks more like gambling. Stories and complaints from Uber users reveal recurring surprises and unclarity about the cost of rides (e.g., claims the multiplier was 9x, a ride of 20 minutes that cost several hundreds of dollars, a claim the multiplier dropped but the total price did not go down in accordance). Users may not pay attention sufficiently to the multiplier before hailing a ride, do not comprehend how the pricing method works, or they simply lose track of the cost of the ride (i.e., the charge is automatic and appears later on the user’s account).

Discontent of customers may also be raised by a sharp contrast experienced between the relatively low normal price rate (e.g., compared with a standard taxi) and the high prices produced by surge multipliers [1c].  A counter argument contends that the price hikes or surges allow for low rates at normal times by subsidising them [2]. More confusion about Uber’s pricing algorithm could stem from reports on additional factors that the company might use as input (e.g., people are more receptive of surge prices when the battery of their mobile phone is low, and customers are more willing to accept a rounded multiplier number than a close non-rounded figure just below or above it (MarketWatch.com, 28 December 2017).

  • Not even a strategy of surge pricing appears to be completely immune to attempts of manipulation. It was revealed in 2019 that drivers with Uber (and also Lyft’s) have tried to game the surge mechanism. The ‘trick’ is to turn off the app at a given time in a coordinated manner among drivers, let the surge multiplier rise, and then turn on the app again to gain quickly enough from the higher rate as long as it prevails. The method seems to have been used especially at airports in anticipation of incoming passengers, based on the knowledge of drivers of several flights scheduled to land during a short interval. The motivation for taking this action: the drivers claim they are not paid enough at normal times by the platform operators (BusinessInsider, 14 June 2019).

Uptal Dholakia, a professor of marketing at Rice University (also see [1]), suggested four remedies to the kinds of problems described above. First, he advised to set a cap (maximum) on surge multipliers and notify customers more clearly about them (greater transparency). In addition, he recommended curbing the volatility of price fluctuations and communicating better the benefits of the method (e.g., reduced waiting times). Dholakia also raised an issue about a negative connotation of the term ‘surge’ that perhaps should be replaced in customer communications [3].

Various forms of dynamic pricing, including surge pricing, are already utilised in multiple domains. It is noted, for instance, that the strategy of Uber was not initiated to resolve problems of traffic congestion; ‘surge’ may be activated as its result but the purpose is to resolve the interruptions that congestion may cause to the service. For dealing with traffic congestion and overload in roads, other types of surge pricing are being used by public authorities. First, a fast lane is dedicated on a highway or autoroute (e.g., entering a large city) for a fee — the amount of ‘surge’ fee is determined by the density of traffic on the other regular lanes. Drivers who wish to arrive faster should pay this fee that is displayed on a signboard as one approaches entry to the lane (a few moments are allowed to decide whether to stay or abort). Second, a congestion fee, which could actually be a variable surge fee, may be imposed on non-residents who seek to enter the municipal area of a city at certain hours of the day.

As indicated earlier, public transportation systems in large cities may charge a higher tariff during peak or rush hours. The time periods that a raised tariff applies are usually declared in advance (i.e., they are fixed). Peak and off-peak rates may apply to different types of travel fares. The scheme is employed to encourage passengers who do not really need to travel at those hours to change their schedule and not further load the mass transportation system. There is of course a downside to this approach for passengers who must travel on those hours, such as for getting to work (employers who cover travel expenses should set the amount according to the cost of the more expensive rate). Using surge pricing in this case would mean that passengers cannot tell for certain and in advance when a higher tariff applies, but the scale of ‘surge prices’ can be pre-set with a limited number of ‘steps’, and thus reduce resentment and opposition.

Other types of dynamic (variable) pricing involve strong technological and data capabilities, including demand at an aggregate level and customer preferences and behaviour (search, purchase) at the individual level. A company like Amazon.com keeps updating its prices around the clock based on data of demand for products sold on its e-commerce platform. A more specific type of dynamic pricing entails the customisation of prices quoted to individual users-customers (i.e., different prices for the same book title offered to different customers). The approach maintains that a higher price could be set, for instance, for books in a category in which the customer purchases books more frequently and even based on search for titles in categories of interest. This form of price customisation is debatable because it aims to absorb a greater portion of the consumer’s value surplus (i.e., how much value a consumer assigns to a product above its monetary price requested by the seller), raising concerns of unfairness and discrimination. The risk to sellers is of making products less worthwhile to consumers to buy at the higher customised prices. (Note: Amazon was publicly blamed of using some form of price customisation in the early 2000s after customers discovered they had paid different prices from their friends; however the practice has not been banned and it is suspected to be in use by companies in different domains.)

  • Take for example the air travel sector: Airlines may use any of these methods of variable pricing: (a) Offering the same seat on the aircraft at different price levels (‘sub-classes’) depending on the timing of reservation before the scheduled flight: the earlier a reservation is made, the lower the price; (b) Changing fares for flights to different destinations based on fluctuations in demand for each destination and time of flight; (c) There are claims that airlines also adjust upwards the fares on flights to destinations that prospect travellers check more frequently in the online reservation system.

More companies in additional sectors are expected to join by applying varied forms of dynamic pricing. Retailers with physical stores are expected foremost to use dynamic pricing more extensively to tackle the growing challenges they face particularly from Amazon.com in the Western world (e.g., supermarkets will employ digital price displays that will allow them to change prices more continuously during the day and week according to visitor traffic levels). Restaurants may set higher prices during more busy hours at their premises, and hotels are likely to vary their room rates more intensively, taking into consideration not only seasonal fluctuations but also special events like conferences, festivals and fairs (e.g., see “The Death of Prices”, Axios, 30 April 2019).

Dynamic pricing, and surge pricing in particular, is the new reality in pricing policy, with applications getting increasingly pervasive. As technological and analytical capabilities only improve, the pricing models and techniques are likely to be enhanced and become furthermore sophisticated. Moreover, methods of artificial intelligence will improve in learning patterns of market and consumer behaviour, expected to enable companies to set prices with greater specificity and accuracy. At the same time, businesses need to take greater caution not to deter their customers by causing excessive confusion and aggravation. The question then becomes: What bases of discrimination — among consumers, at different times, and in different locations — would be considered fair and legitimate? This promises to be a major challenge for both enterprises that set prices and for the consumers who have to judge and respond to the dynamic prices.

Ron Ventura, Ph.D. (Marketing)

Notes:

[1a-c] “Uber’s Surge Pricing: Why Everyone Hates It?”, Uptal M. Dholakia, Government Technology (magazine’s online portal), 27 January 2016

[2] “Frustrated by Surge Pricing? Here’s How It Benefits You in the Long Run”, Knowledge @Wharton (Management), 5 January 2016. A talk with Ruben Lobel and Kaitlin Daniels at Wharton Management School at the University of Pennsylvania.

[3] “Everyone Hates Uber’s Surge Pricing — Here’s How to Fix It”, Uptal M. Dholakia, Harvard Business Review (Online), 21 December 2015

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Consumers may develop attachment to product objects based on things such as attributes, experiences, or values they share. The emotional attachment comes about due to a personal meaning the product has for the consumer that is unique and special in some way. The concept of product attachment is well known in marketing and consumer behaviour, but it has been a difficult challenge to plan for attachment and to implement during the product design process. The researchers Orth, Thurgood, and van den Hoven (2018) explored the prospects of creating products that are designed to connect with consumers based on their self-identities and life stories [1].

In thinking about self-identity, we can apply different means by which we perceive and define ourselves as persons (“who I am”). The process of construing one’s identity may start with his or her personality traits (i.e., self-image), but it can be expanded by adding beliefs, goals and values in life, an overall view of life and a look for the future (identity may also be expressed through salient group affiliations: social, professional etc.). When a good match of a product with any of those aspects is found, it may become the foundation for a consumer’s attachment with the product. However, there is another avenue for forming product attachment by means of connecting through episodes and elements in one’s life story or narrative — experiences and special moments (memories), people, places, and other objects (e.g., ties to existing possessions).  Orth, Thurgood and van den Hoven follow this avenue to look for opportunities to create product objects that designated individuals would meaningfully connect with. They state their objective as “purposefully create meaning by evoking meaningful associations” from one’s life narrative or sense of self.

In a marketing context, brands rather than products per se would be the appropriate targets for attachment. Brands identify products. Yet furthermore, a brand, as an intangible entity, may hold associations beyond attributes linked directly to the physical product that the brand name is assigned to; the associations can extend to brand personality traits, values, heritage, and more. The quality of an attachment may be assessed by (a) the brand-self connection that is built (i.e., how well the brand’s associations agree with and corroborate an individual’s self-identity to the extent that the brand becomes part of one’s definition of his or her identity); and (b) the prominence of brand associations in memory (e.g., how significant they are, that is, they come instantly and automatically to mind) [2]. Orth and his colleagues, who focus on product design, do not step-up from the product- to the brand-level, although they do refer to aspects underlying attachment that extend beyond the materiality of the product.

The researchers applied a three-stage methodology: 

Inspiration is derived from the life stories of consumers through in-depth semi-structured interviews (with three participants) —  participants told the researchers about their life stories, including people and places that were involved, memorable experiences they have had, possessions they cherish, as well as their views on physical product properties such as colour, texture and materials.

Creation of artefacts (products), designed to capture associations linked to valued and meaningful experiences, people, places, etc. in the memories (life narrative) and sense of self of the consumers-participants. Two artefacts were especially designed and made for each participant. The objects stayed with participants for two weeks.

Evaluation of the meaning, value and emotional tie each consumer-respondent ascribes to those two artefacts, designed-to-fit associations from each one’s life experiences and self-identity (note that the participants were not told that the objects were ‘designed-to-fit’ personally for them). As a reference, each respondent was also asked about his or her perceptions of and emotional ties to an artefact designed for another participant and to possessions they own which they regard as significant to them.

The results obtained by Orth, Thurgood, and van den Hoven were mixed. With at least one product-artefact they successfully captured the expected match in associations for forming an attachment; for other artefacts they partially captured the associations that would predicate an attachment (e.g., an attachment was formed but based on associations different from those expected); and in the case of at least one artefact, the design was evidently inadequate in forming an attachment (i.e., practically being a miss). The results testify to the difficulty of identifying and anticipating associations that will serve as the meaningful bridge for forming an attachment, even when quite detailed  information about the consumers to draw from is available.

Louise was offered a transparent candle cover (‘Diramu’) with silhouette of native Australian trees; the candle had a scent of smoky campfire.  It was intended to be reminiscent of her childhood in an area surrounded by bushland in Australia, where she had played frequently, but there was concern it would bring up less pleasant, disturbing memories of the struggle to keep bushfires away from her family’s home. Nevertheless, the designed Diramu managed to capture a ‘soft spot’ in the memories of Louise for bushfires (i.e., the bushfire was pleasant, not scary, and the candle’s scent had a feeling of home).

A partial success was obtained in cases as these: (a) Alex liked a porcelain decanter (‘Kiruna’) designed for him due to its fine aesthetics (attractive, elegant) and delicacy that he appreciates and favours.  But the decanter reminded him of the colours of Greece (white and blue) rather than his winter activities and skiing vacations with his children as intended. (b) Karen received a pendant necklace (‘Crater’) with a shiny anthracite coal that would resemble a gemstone. She found it ‘quite nice’ and she ‘quite liked it’. However, she grew no attachment to the object in spite of her affectionate memories of her father as a coal miner in England. The cue of coal failed to transfer the emotional significance regarding her father to the Crater artefact. The researchers admitted that they missed the completely functional attitude and emotional indifference of Karen towards objects, as they discovered it only in the evaluation stage.

The special world clock device (‘Globe’) prepared for Alex in conjunction with his many travels did not meet the expectations. Alex started developing a passion for travels during childhood in Australia and extended it to travels overseas in adulthood through his work; he likes connecting with people in different countries and collecting souvenirs (e.g.,  refined art objects, books and paintings). The Globe was made to show the names of places around the world (e.g., cities) at the time each location, according to its time zone, enjoys a Happy Hour for evening drinks. However, the name title of places turned out to be too weak as a cue to link to specific experiences. Alex commented that while many of the cities mentioned reminded him of some wonderful memories from his being there, “that thing doesn’t reflect those”. The clock design apparently also did not appeal to Alex (e.g., too simplistic, not to his aesthetic standards, and even stopped functioning after a while), leaving a negative impression on him.

The names as cues were probably too general and vague to trigger meaningful associations from the respective places; perhaps photographic images would have helped, but they too should prove personally relevant to Alex. Neither the informational cues (names) nor the design of the Globe artefact corresponded meaningfully with memories and associations of Alex from his travels, and thus according to Orth et al., it can be argued that the artefact was lacking authenticity for Alex.

  • Fournier (1998) studied the life narratives of consumers through in-depth interviews, though in her research the aim was to trace anchors for developing relationships between consumers and brands. That is, she learned from the products-in-use in the lives of three research participants about the roles that the brands of those products played in their lives and how bonds could be created with the brands based on the rich meanings they received [3]. The contribution of Orth and his colleagues is special in their attempt to leverage the information obtained about the life narratives of consumers into actual product objects designed specifically for those same consumers.

Realistically, companies cannot gather so detailed and personal information from too many consumers to enable them to design a product that will fit particular aspects from the life narrative or self-identity of each consumer. Orth, Thurgood and van den Hoven spoke to just three consumers and they had varied levels of success in anticipating the associations upon which attachment would be formed.

One direction they suggest, borrowing from previous research, is to create a set of optional product designs (versions) that would confer meaningfully to different target groups of consumers. In other words, each design could contain cues that any particular consumer may connect through to his or her idiosyncratic associations so as to develop an emotional attachment to the product object. This may suggest the importance that prevails in studying the lifestyles, values and psychographics of consumers (using surveys) in order to create the knowledge base necessary for designing personally meaningful product models. Nevertheless, this kind of information may never be as intricate and deep as the life stories studied by Orth and his colleagues. Finding personal meaning in products (and brands) could remain in the domain of the consumers based on what they know about themselves and their past experiences in life.

Another direction is to give consumers an active role in self-designing a product customised for each individual consumer who takes part in such a scheme. The consumer first has to choose what type of product is wanted; then he or she can choose features or properties (e.g., aesthetic-visual, functional) that may be perceived by each one as effective cues to trigger meaningful associations. The aim of self-designing a product in this context is self-expression and connecting to one’s experiences and self-identity, not strictly satisfying one’s utilitarian preferences. In typical schemes of mass customization consumers are constrained by the capabilities and willingness of companies to make the products of their designs. But in the age of 3D printing, consumers may gain greater authority, freedom and flexibility to design and create products to fit more closely the way they perceive and feel about themselves. Orth et al. put it this way: “Advancements in custom manufacturing technologies such as 3D printing provide growing opportunities for bespoke design practices such as those presented in this paper as an alternative to traditional mass production processes” (p. 101).

Orth, Thurgood and van den Hoven set two conditions for designing objects (products) with meaningful associations: (1) Cueing Meaning —  the product object has to cue an aspect of identity of the consumer that is personally significant or meaningful (e.g., the Kiruna made of porcelain related to an aspect of identity, ‘ceramics man’, not significant enough to Alex whereas the Diramu representing bushfires connected to an aspect of experience of ‘a pleasant bushfire’ uniquely meaningful to Louise); (2) Authentic Embodiment —  the consumer has to perceive the way a product object cues an association as authentic for it to elicit its personal meaningfulness (i.e., the consumers “must perceive the object to successfully embody the associated source”, hence establishing an authentic linkage between the object and source) (e.g., the Globe failed in relating authentically to the travels of Alex).

Product designers, with the help of design researchers, can go quite a long distance towards consumers in designing products that will be more meaningful to them, but they have to know and respect their limits in approaching consumers close enough. The difficulty is mainly in anticipating the associations that will be perceived by an individual consumer as relevant and significant to be the basis for forming an attachment, and then capture it in an authentic way. As Orth, Thurgood and van den Hoven phrase it, designers should acknowledge that they are “limited to creating possibilities instead of certainties in any attempt to design for product attachment” (p. 100). The task of finding a meaning in a product neither has to be relegated fully to the consumer. It should be a shared endeavour in which the designers recommend products and provide sufficient informed cues to meaningful associations, whereon consumers can detect and choose which ones in a product design truly matter to their self-identity and life experiences; and if technology allows, the consumers may be given even a more active role in creating such design cues meaningful to them.

Ron Ventura, Ph.D. (Marketing)

Notes:

[1] “Designing Objects with Meaningful Associations“; Daniel Orth, Clementine Thurgood, & Elise van den Hoven (2018); International Journal of Design, 12 (2), pp. 91-104. (Images of the artefacts can be seen in the article here).

[2] “Brand Attachment and Brand Attitude Strength: Conceptual and Empirical Differentiation of Two Critical Brand Equity Drivers”; C. Whan Park, Deborah J. MacInnis, Joseph Priester, Andreas B. Eisingerich, & Dawn Iacobucci (2010); Journal of Marketing, 74 (November), pp. 1-17

[3] “Consumers and Their Brands: Developing Relationship Theory in Consumer Research”; Susan Fournier (1998); Journal of Consumer Research, 24 (4), pp. 343-373

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That the music retail industry is in trouble is no secret. When we look, however, at what happened to major music store chains over the last five years it may become much clearer how serious the crisis is. Here are some highlights:

  • In 2007 Richard Branson decided time was up for Virgin‘s music Megastores and sold his chain of 125 stores in the UK and Ireland in a management-buy-out to a team of executives. The new retail brand Zavvi took place of the Virgin name that after thirty years vanished from High Street in the UK, particularly its famous flagships on Oxford Street and in Piccadilly Circus in London. By 2009 Virgin closed the last of its stores in the US. Stores in other countries were also closed while a few stores may still be found under the Virgin brand  in France, Greece, and in the Middle East. 
  • Zavvi survived no more than a year. It was dependent on a unit of Woolworths (Entertainment UK) as its primary supplier and with the collapse of the veteran retail chain, Zavvi ran into serious difficulties, forced into unfavourable new trade agreements. It entered administration in late November 2008 and within 3 months the chain ceased to exist. 14 of its stores were sold to HMV, 7 others and all stock sold to Head Entertainment, and all remaining stores were liquidated.
  • The once giant American music retailer Tower Records got into troubles already in 2004 when it sought bankruptcy protection and was doomed just two years later in 2006. Great American Group that bought the retailer in an auction soon declared its plan to shut down the music retail chain. All US stores were closed by the end of 2007 and in the following three years many stores overseas were sold or closed down. The stores in the UK closed in fact already in 2003 (Virgin took over its flagship in Piccadilly Circus but as noted above it did not last long).
  •  And now we hear that HMV is in trouble and struggling to keep its head above water. It is threatened by an increasing debt and a difficulty in keeping with terms of a bank loan. To be accurate, it is since January that news of troubles at HMV have been coming in about unsatisfactory sales results over the holidays shopping period and three consecutive warnings of dropping profits. First it announced plans for the UK and Ireland to close 40 music stores along with 20 book stores of Waterstone’s that HMV Group apparently also owns. Then it became known HMV intends to split Watesone’s from its core business in music, video, and games ; this prospect sale is still in negotiations. Analysts predict that break up is inevitable but still express concern that this will not be enough and HMV will be forced to close more stores to avoid administration.  

Explanations given by analysts for these misfortunes are probably not surprising many: the growing shift of consumers to digital download of music, video and games, and the tight competition from stores like supermarkets that sell discs at low-cost. While retailers started offering their merchandise online on their websites several years ago they were quite unprepared for the trend of digital download.

As implied above the problem is centered on but not limited to music. More than ten years ago music chain stores have actually transformed into entertainment media stores in order to expand their business and not be reliant only on music. Yet, the retailers could not cope with the fast technological developments in this field during the years 2000s that altered consumer behaviour patterns. This is not just about low price but also convenience, flexibility of choice and immediacy. True, especially in the early Internet years but even nowadays items can be obtained for free on the net and this phenomenon poses problems for many in the industry, perhaps mostly to the artists. This issue is complex with legal ramifications beyond the scope of this article-post. However, the whole field encompassing the different types of entertainment media has progressed considerably and broadened in the past five years and it would be too simplistic to attribute it squarely to price.

Music stores should not be given up too quickly. There are certain things about the stores — the sights of loaded stands of products, colours and sounds, movement on the floor and buzz — that the Internet and various electronic devices cannot provide. Many private stores, small or niche stores, may still remain but the chain stores were the real engine of this retail industry. It is worth investing much more effort to create a new model for music or entertainment media stores that will retain some of their more traditional virtues in new forms and yet offer new benefits. I suggest two dimensions for development in which strong advantages can be created: personal customization and social interaction. These can be sources for strong shopping values and enjoyment.

Personal Customization

Consumers want to choose more freely their favourite songs and create their own song compilations. They are much less willing to wait for record companies to produce albums and compilations based on their judgements. Consumers are less tolerant towards albums that contain 2-4 really good songs and 8-10 mediocre ones. The choice has to be delegated more extensively to the consumers. This phenomenon is becoming stronger and wider.

Perhaps as some analysts claim there is less justification for the large space of stores we have known so far. Stores may restructure and re-allocate floor space between product displays and personal self-service stations. A shopper will be invited to sit on a stool in front of a flat screen at his eye-level and use a multimedia programme to search and scan the store’s wide selection of music pieces as well as films, TV series episodes or games and choose whatever he or she likes. When the shopper completes, for example, to create a song compilation to his/her taste, an instruction will be given to the computer system to burn it on a CD, DVD, Blue-Ray disc or alternatively be saved on some other memory device such as Disk-on-Key. Appropriate payment arrangements may be devised including advance deposits and pay-as-you-collect at the cashier or pay with credit card at the station. Sessions may be limited in time.

Why doing this at the store and not at home? First, it may be because of powerful utilities of the multimedia programme that makes the shopping experience smoother and more enjoyable — well-designed graphic displays of items planned with consumer search behaviour in mind and friendly tools for building and displaying at any time the content of the shopper’s basket. The display may incorporate information structures such as a matrix or table of a relatively large variety of items , a “ribbon” mounted across the screen (moved left and right) for quick scan in a narrowed-down set of items, or “wheels” that include possibly artists in an inner tier and song pieces in an outer tier. Second, the programme may allow playing songs or showing short samples from film in live-streaming directly from the store’s library (if the system works on an Intranet it may work faster than on the Internet). Third, when required the shopper may consult with a personnel adviser, assuming hopefully that the store employs people expert in various genres of entertainment.

It should be remembered, however, that there are different types of shoppers. We may distinguish primarily between (a) those who come with a more clear and well-defined plan of specific songs, artists, TV programmes etc. that they wish to find and buy, and (b) “explorers” who have a more general idea, perhaps only at the level of a style or genre, of what they want and whom in the “old days” liked to browse through items on display with their fingers. For consumers who do not have well established preferences and who even seek surprising discoveries the old format was simpler and easier to explore and probably less time-consuming compared with a computer application. A multimedia programme with a search engine may be less advantageous for them. In order not to lose those customers the store will have to devise more creative solutions, combining intelligent computer-based cues and guiding tools, physical displays even if more limited than before, and human advice.

Notwithstanding, there are types of music pieces and areas in which it should be sensible to offer physical copies on display. For instance stores can continue to offer films, live concerts,  TV series by season, and games as ready-made products. In addition, areas like jazz and classical music should still deserve special rooms with most space allocated to displays of physical items to accommodate usually more conservative habits of amateurs of these types of music.

Social Interaction

Consumers of entertainment of sorts, especially younger ones (say under 30), prefer to sit in front of the computer at the comfort of their homes, sometimes for hours, surf the network for various music and video pieces. They also like to download pieces onto portable devices such as MP3 players, smartphones and tablet computers. But they do not truly perform this activity all alone. Conspicuously as they sit on their own with the computer they often communicate with friends and relatives, consulting and change ideas or recommendations talking on the phone or chatting in social media communities.

So why not offer these consumers a more lively social way to interact with friends face-to-face  in a store? For that purpose, special sitting sets for 2-4 people can be installed in special areas of the store (not to disturb other customers). At the set a small group of customers-friends can sit together, use each his or her multimedia application to explore and examine favourite pieces while from time to time conversing with each other on their findings. This setting offers people a more natural, direct and open way of socializing, and it has a good chance of producing richer shopping baskets.

These are two directions for developing a new model for music or entertainment media stores that I conceive as promising from a consumer perspective. More generally and beyond the proposed directions, stores will have to create benefits that enrich the whole experience of shoppers during their visit and that the Internet and personal electronic devices (i.e., for online sales and digital download) cannot in their capacity replace (e.g., contact with expert staff, events, sensual stimuli in the store’s scene).  For stores’ owners and managers, the goal is clearly to convert shoppers into happy customers who enjoy returning frequently to the store(s).

Ron Ventura, Ph.D. (Marketing)

Media Sources:

“Branson sells Virgin Music Stores”, BBC News, 17 Sept., 2007

“Zavvi placed into administration”, BBC News, 24 Dec. 2008

“Tower Records victim of iPod era”, Associated Press at MSN Money, 10 Oct. 2006

“HMV prepares for split to stem rising debt“, Financial Times FT.com, 28 March 2011

“HMV in its third profit warning of this year”, The Guardian (online), 5 Apr. 2011

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