thenextwave

Passion’s new business models

Posted in consumers, retail, technology by thenextwavefutures on 7 January, 2013

20130106-231050.jpgI have an article in the latest edition of Blink, which was published just before Christmas. Here’s a slightly fuller version of that article.

It used to be the case that businesses which followed people’s passions were niche businesses. Some were not businesses at all, in the conventional sense, but groups of fans and hobbyists doing some trading on the side.

The internet has changed all this. In the past, businesses used to have to choose between reach (mass market, tending towards commoditisation) and richness (niche market, with depth and sometimes knowledge rolled into the service). The internet allows businesses to break out of this trade-off. Passion has mass market potential.

That’s the argument, anyway, of Philip Evans and Thomas Wurster, who developed it in their book Blown to Bits, now something of an internet classic. They created a useful model for understanding this dilemma in the internet world.

Richness versus reach: how the internet squares the circle

Presentation-1.002

Source: Evans and Wurster, Blown to Bits

Passion is about experience, knowledge, and connoisseurship, and there are strong consumer trends which suggest these are all on the rise. One thinks of the professionalisation of the consumer world. It is no longer enough to be an expert cook; one needs to have the same knives a professional chef expects to find in the restaurant kitchen. The keen cyclist follows a professional training programme, recording training sessions via a heart monitor and uploading the data for analysis when they get home. And in many areas – music production, design, video editing – the cost of the technology needed for a professional looking job has plummeted. The knowledge and tailoring that richness required used to limit the reach. No more.

It is an obvious point, but the internet has raised the game when it comes to passion – and made new markets for it. 30 years ago the music fan who knew about the career of, say, Van Dyke Parks or Professor Longhair would have built up their knowledge painstakingly, from specialist magazines and record covers and books. Now, anyone can get that far in a moment on Wikipedia. The base is a lot higher. But it also means that the opportunity is bigger. The knowledgeable fan or enthusiast is the curator of a far larger museum, with a far larger and far more engaged audience. Similarly, the internet builds opportunities for businesses that are able to speak the same language as fans and enthusiasts to reach them far more easily; they are ‘pulled’ by the people in those communities of interest rather than having to ‘push’ themselves through conventional marketing. Geography becomes decreasingly important.

The new curators

So how do we understand this in terms of proposition?

One tool is a simple matrix which explores levels of engagement by provider and by customer, seen in the diagram. This was originally developed by The Futures Company in a report on the future of retailing which was published by Coca-Cola.

Presentation-1.001

Source: The Futures Company

The matrix is largely self explanatory. In the bottom left there is low engagement on the part of both supplier and customer. This is a passion-free zone, occupied by retailers such as Poundland or other budget stores, the world of piling high and selling cheap.

The bottom right sees low engagement by the customer but not by the provider. This is a zone of necessary but low-interest goods, provided by relatively high engagement providers. One thinks of a supermarket such as Carrefour, whose proposition is underpinned by hugely complex logistics. The passion here is largely behind the scenes, though sometimes it surfaces in positioning statements (such as “passionate about [fill in noun of choice here]”) which seem like a good idea in the creative meeting but largely pass consumers by.

The top two zones are more interesting. The top right is the expected area for the passion-filled “rich” proposition, in which high engagement providers and high engagement customers meet in a passionate embrace: The Body Shop and L’Occitan, for example, or Innocent’s fruit smoothies, or Divine chocolate. Operating successfully in this space is expensive and it is easy to lose credibility (increasingly easy, in a world of social media) but offers premium returns while it works. Increasingly there are also online offers runs by enthusiasts that are increasingly prominent in their communities of fans.

Fans love fans

In the top right hand zone we see a passion sleight of hand. Customers are engaged but suppliers are not. But this is the space in which online providers leverage the enthusiasm of communities of interest to break the dilemma of reach and richness, offering depth and scale. One thinks of Amazon, for example, which appears to be passionate about books, but which we know ended up in books only because it was the simplest product around which to start building an online retailer. But what Amazon has done brilliantly is to build a space that has been colonised by enthusiasts, and it has encouraged this colonisation, in the same way in which a gardener might design an area knowing that it will attract bees or butterflies. Ebay has worked in the same way, making a new market where none existed before, the online equivalent of the yard sale and the flea market. But, so far, iTunes has failed signally to connect with the passions of music fans, creating a soulless transactional engagement space.

In this gap is an opportunity for retailers beached by the internet. Fans love fans. And while every music shop can’t have the enthusiasm of London’s iconic Rough Trade, the high street or main street retailer needs to break out of the mindset of logistics and stock management that dominate contemporary retailing. Curators can thrive here, linking the world of knowledge and commitment to both the physical and digital worlds.

Blink Edition 5 – ‘the Passion Issue’ – is available here.

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  1. […] proposition might have looked like. Curation would have been a better strategy, as I argued in my Blink article recently, but that would have required thinking about how the stores were designed, and also paying […]


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