Has the Sharing Economy Disrupted Marketing? Not Quite…

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The sharing economy has been revolutionary for consumers. Enabled by the internet, they have more control than ever over what, where and how they purchase, and how they use those products and services. It has also created confusion for marketers now tasked with transforming traditional practices and beliefs to fit this new reality. Wharton marketing professor Cait Lamberton offers some guidance in a new paper titled, “Marketing and the Sharing Economy.” Recently published in the Journal of Marketing, the paper was co-authored by Giana M. Eckhardt, Mark B. Houston, Baojun Jiang, Aric Rindfleisch and Georgios Zervas. Lamberton joined Knowledge@Wharton to talk about how marketers can keep up with the changing economy and even shape its future. (Listen to the podcast at the top of this page.)

An edited transcript of the conversation follows.

Knowledge@Wharton: From a marketing standpoint, what are some of the key characteristics of the sharing economy? It’s a term we hear often these days.

Cait Lamberton: Yes, and I think that is part of the problem. Part of the reason we wanted to write this paper is that you hear a lot of discussion of the sharing economy, and it has been that way for probably 15 years. This was a big deal in 2003, 2004, and it’s a huge question to ask what it is. What we decided that it really has to do with is a way of exchanging value, usually as a matching platform to bring people together. Very often, the supply is crowdsourced, so the goods are coming from lots of different people.

There are other attributes that often go along with sharing economy businesses. For example, there is usually a heavy reliance on trust and reputation because you don’t have a firm that is standing in the middle as an intermediary between people. But that is not necessary, and all sharing economy businesses don’t necessarily rely on people giving each other star ratings.

Part of the big question of this paper was, what is this thing and why does it matter? A lot of the discussion said the sharing economy changes everything, in the same way that you might remember that in the late 1990s people said, “The internet changes everything.” Then you ended up with a bunch of businesses who had no business model.

“In the sharing economy, the consumer is also a producer.”

Knowledge@Wharton: What are some of the key challenges that the sharing economy poses for marketers?

Lamberton: One of the biggest things that we had some really interesting discussions about has to do with the role of the consumer. Traditionally, you have a firm that provides a good or a service, and the consumer acquires it. In the sharing economy, the consumer is also a producer. There is this new term now in the lexicon, being a “prosumer.” The same person who rides an Uber on Friday might be the same one who drives one on Saturday.

More fundamentally, even if you don’t take on the role of being a producer per se, you are participating in a system in a far more active way. For example, on some of the crowdsourcing banking platforms, you can sign up to try to get a loan, but you also are going to assess other people’s credit worthiness. And that is a whole new role for the consumer.

The question is, how do we market? Which role are we marketing? If we market really strongly toward the people who just want to consume, what happens to the people who also need to provide [goods or resources]for the platform to work? Do we want to mostly reach out to the people who are going to provide the good or the resource, and then end up with nobody who demands it? There is a balancing act between the different identities of the consumer in this space.

Knowledge@Wharton: Are there some classic tenets of marketing that can help answer some of these questions?

Lamberton: In a lot of cases, we use the same ideas that we already have, and that was part of the point of this paper. Everything doesn’t go out the window. One thing that we might say is, let’s use classic rules about segmentation. We know that when people have a resource, the longer they’ve had it, the more value they tend to place on it. We need to reach out to people who were asking to put their resource into the pool with a different kind of an appeal than people who are new to the pool. We have classic information about how expertise changes people’s interaction with a good or service, and that doesn’t change in the sharing economy. It is really very much the same.

Knowledge@Wharton: In this paper, you suggest that marketers could learn a lot from consumers in this space. It seems that consumers feel like they have a pretty good handle on the sharing economy. It doesn’t really faze them that much.

Lamberton: I think that is definitely the case. We stand back sometimes in academia and say, “Wow, look at this big, crazy new thing.” The people who are actually using it are like, “It’s not a big thing at all. It is very normal.” For example, you might think of things like crowdsource lending. This can be very confusing to marketers in some ways because we think that everyone should approach this with a pretty standard, rational model about risk and return, etc. Consumers have intuitions about who they want to borrow from, who they want to lend to, who is going to be all right. If they have entered this market, they are already comfortable with it. So, in some ways, we have to get out of our own way and listen to consumers talk about their experience instead of trying to impose the roles that we expect should govern their behavior.

Knowledge@Wharton: We are coming up on a generation of consumers who have never not had the sharing economy, and that is going to be the dominant group going forward.

“We have to get out of our own way and listen to consumers talk about their experience instead of trying to impose the roles that we expect should govern their behavior.”

Lamberton: For those consumers, the acquisition-based economy can be a bit odd. By the time an individual gets to the age where they are buying their first car, they have had Ubers their entire life. The question of why one would then want to acquire for sole ownership becomes more complicated. When that was the norm, it was obvious and people were willing to take out big loans to do this. But now I have better options. Why would I want to saddle myself with more debt? Why would I want to worry about having a garage, worry about where I park? It does create some challenges for the incumbent firms.

Knowledge@Wharton: I would think this is a whole new set of questions that you would have to design marketing campaigns to answer. It’s not just, “The car I’m buying has air conditioning.” It’s, “Well, why should I buy one?”

Lamberton: Absolutely. There are alternatives that are just as easy to use and seem to cost less. I think this is a tricky spot because depending on one’s usage rate, the sharing economy may not always save you money. It could be that continually accessing something feeds your need for variety, and it feeds your desire to be unfettered and free, but it can get really, really expensive.

We see this with clothing sharing systems. They are incredibly appealing because you get so much variety, and very often you can access things at a lower price than you could buy them for. You can get high-end brand names. But in reality, if you are spending $200 a month to rent clothes and are acquiring nothing, at the end of the year you still don’t have anything. We have to be a little bit careful about suggesting that this is a way to be most efficient with your resources. It is not always, and it can lead people down some tricky paths.

Knowledge@Wharton: You also propose that marketers could sort this out by adopting some sharing economy principles into their practice or partnering with some players in the sharing economy. How would that work?

Lamberton: I think that what we see is that sharing economy ideas are entering traditional business in many ways through the effect route, in the sense that sharing economy businesses have from their root emphasized collaboration, co-ownership, participation, co-production. Traditional firms can certainly do this without any loss of competitive advantage.

They are able to say, “You are a partner, your ideas do matter, and what you bring to us as a consumer is part of all of our success.” I think that when traditional firms import ideas in the sharing economy that create a community, they gain a form of differentiation that is very hard to create without pulling in those ideas.

Knowledge@Wharton: What is next for this research?

Lamberton: I am participating in this panel on food waste at the National Academy of Sciences. We waste 40% of the food that we purchase, and a lot of that gets wasted at the consumer level. There is an idea that sharing could be a way to help with that. Because what happens when you waste is that you have a slack resource that is not used, and I may never have personal consumption needs that are going to take that up, no matter what I try to do with it. Yeah, I can cook it, but then I throw it away because it’s leftovers. I can store it, but then I forget about it in the fridge. The fridge is where the food goes to die.

“Depending on one’s usage rate, the sharing economy may not always save you money.”

The idea is that if we make sharing a more integral part of consumer life, we probably can reduce waste. This is what has happened with carpooling, for example. But we don’t do this so much with food for a lot of interesting and complex cultural reasons. But we want to think a little bit about whether sharing in general can help us reduce waste and get more out of the things that we have.

Knowledge@Wharton: It wouldn’t be a traditional marketing campaign like, “Share a Coke with a friend,” but more like, “How do I market this particular product and also encourage people not to waste it?”

Lamberton: Yes. We have spent a lot of effort getting people to buy things, but then we don’t necessarily worry about whether they use them. People do tend to feel an aversion to waste. If you are constantly throwing something away, you are going to stop buying it over time. So, there are really implications for marketing.

Another direction we want to go is to challenge the gospel that sharing makes people happier. We would love that to be the case. We would love it to be that everybody who participates in a sharing economy business is suddenly in harmony with the people around them, and this is wonderful, and birds chirp, and the sun comes out. The truth is that we have some preliminary evidence that for people who face financial constraints, participating in the sharing economy can make them quite unhappy. Because what happens is they temporarily access something they would really like to have, and then they have to give it back. It becomes, if anything, a cause for envy and a cause for shame. If you show up at your high school reunion in a really fancy car, and people find out that you just got it through the car sharing service, it doesn’t feel great.

Interestingly, for people who are not financially constrained, who could buy anything they want, sharing doesn’t create these negative effects. For them, it is just a way to acquire more variety. It feels great, it’s fun, no commitment, everything is wonderful. But I think we need to be a little bit careful about assuming that the sharing economy is going to make everybody feel better about their lives.

This article first appeared in www.knowledge.wharton.upenn.edu

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