The collaborative economy is “a fast growing segment where common technologies enable people to get the goods and services they need from each other, peer to peer, instead of buying from established corporations.” According to a new report called “The New Rules of the Collaborative Economy” by Jeremiah Owyang and Alexandra Samuel, there are a few key ways traditional businesses can be competitive in the next economy.
Though already established, corporations will have to rely on new strategies to remain successful in this economy. The entertainment industry isn’t the only industry seeing the shift of customers’ preferences to paying for access over ownership with streaming services like Netflix and Spotify steadily growing, it’s happening in industries across the board.
Newer startups and companies have a leg up since they understand modern customer behavior. According to the report, one in five customers prefer sharing as their first option, and three in four decide to share over buying when presented with the choice.
So how can traditional businesses jump into the collaborative economy pool and navigate its risky, fast-growing waters?
Customers Want to Save Money
The report states that an overwhelming 82 percent of customers make transactions within the collaborative economy that are influenced by price. Many people nowadays are looking to save money. The price of a service or item is what makes people participate in the share economy, but that very same price is what could also cause people to head back to purchasing from a traditional company.
Even though it’s the most obvious fix, traditional companies don’t necessarily need to lower their prices to woo back collaborative economy customers. Companies should participate in this trend instead and use the existing products or services from their brand to do so. One of the most popular ways to participate in the collaborative economy is to create a marketplace for customers to buy and sell peer-to-peer. Successful e-commerce companies like Amazon and Asos have already gotten in on this trend by allowing customers to sell used books and clothes, respectively.
Customers Want Convenience
No matter what age demographic they fall into, another motivator that causes people to share over buying is convenience. Traditional companies should create offerings that customers can order on-demand. A way to do this is to offer brand as a service. Startup companies like Mila, Instacart, and Etsy, have joined forces with reputed brands Swisscom, Whole Foods, and Nordstrom, respectively, to offer their customers goods and services on-demand.
One thing the share economy promises, but doesn’t always deliver is community and connecting to local people and businesses. In the report, when ordering gifts for special occasions, many people said they are willing to choose retailers in their community over buying online if that retailer carries locally made items.
The Importance of Brands
Even within the volatile world of the collaborative economy, brand recognition is still important. In fact, to customers, brand is just as important as convenience. If you’re thinking of trying a car service for the first time, what’s the first one that pops into your mind? Even though there are other services like Lyft and Sidecar, chances are it’s Uber you think of first. Brand awareness is why Uber dominates the car sharing market. However, brand recognition can also be risky, especially for newer companies, as negative reviews of service providers shared on the app or on social media mean that people may begin to see the brand in a negative light. A pillar of the collaborative economy is users sharing individual contractor’s ratings for other users to see and also trusting that those reviews present an accurate portrayal of the service provider. Traditional companies can exploit this since their reputations are founded on the company brand as a whole, not individual crowd member ratings.
Trust already has been built over the years and decades between customers and traditional companies, so startups are starting to work with big brands. Startups can also use this existing trust customers have with established brands to raise awareness and trust levels of their own brand by partnering with traditional companies. Furthermore, traditional buyers are more willing to give startups a try if their services and products are linked with familiar big brands.
To compete in the collaborative economy, traditional companies should search for the spot where “what customers want” and “what your business can change right now” meet.
By keeping in mind the reality that customers are flocking to the sharing economy because of pricing, convenience, and brand, you can find a way to win customers back if you use sharing models to give them newer, more attractive options.
Image Credit: Crowd Companies and Vision Critical