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Business Horizons (2014) 57, 225234

Available online at www.sciencedirect.com

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www.elsevier.com/locate/bushor

Bringing product and consumer ecosystems to the


strategic forefront
Mayukh Dass a,*, Shivina Kumar b

a
Rawls College of Business, Texas Tech University, MS 2101, Lubbock, TX 79409, U.S.A.
b
University of California, 2401 Piedmont Avenue, Berkeley, CA 94704, U.S.A.

KEYWORDS Abstract The widespread adoption of technology and electronic media has dra-
Ecosystem; matically altered the set of products consumers compare before making a purchase
Networks; decision. Online platforms have succeeded at drawing linkages among products by
Marketing strategy; highlighting those that are preferred, evaluated, or purchased together. However,
Electronic commerce; despite the increase in both product and customer inter-connectedness across
Product categories; markets, managers continue to make decisions based largely on the dynamics of
Brand; competition within narrow product categories. In this article, we raise the call for a
Customer segment; migration from a category-focused mindset to an ecosystem-focused strategic mind-
Marketing research; set that acknowledges and accounts for the network of related or unrelated entities
Social media that a specific product resides within. We illustrate the importance of this shift using
examples of preference, choice, and customer networks from popular online plat-
forms. We then discuss the impact of the shift in strategic mindset toward ecosystems
on competitive structure analysis, market research, brand footprint analysis, intra-
band ecosystems, promotion planning, new product development, customer valua-
tion, strategic alliances, and market segmentation.
# 2013 Kelley School of Business, Indiana University. Published by Elsevier Inc. All
rights reserved.

1. Bringing product and consumer bring a connectedness-based mindset to the fore-


ecosystems to the strategic forefront front of all market-based strategic thinking remains
an open question. While it is becoming increasingly
Interconnect and succeed or wither away alone: apparent to strategists that it is virtually impossible
That seems to be one of the emerging themes across to build successful products by thinking of markets in
various parts of the business landscape. But how to isolation, ecosystem-based strategic processes have
not yet evolved in the majority of corporations.
For example, while most executives acknowledge
* Corresponding author
the inter-connectivity among customers, as well as
E-mail addresses: mayukh.dass@ttu.edu (M. Dass), the interdependence among unrelated product cat-
shivina@yahoo.com (S. Kumar) egories, the mere realization has not generally

0007-6813/$ see front matter # 2013 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.
http://dx.doi.org/10.1016/j.bushor.2013.11.006
226 M. Dass, S. Kumar

translated itself into a coherent strategic approach addition, they must protect their pricing power that
that takes advantages of these inter-customer and is being ceded to comparison engines and shopping
inter-product linkages. robots. Of course, none of this takes away from the
However, the signs of inter-connectedness are strategic imperative to ward off traditional com-
unmistakable. Customers are leveraging the power petitors from within their own, traditionally defined
of social media to learn about and disseminate product categories.
information regarding their purchase and service
experiences (Kaplan & Haenlein, 2010: Mangold &
Faulds, 2009). Posts on blogging and micro-blogging 2. Thinking about ecosystems
sites are disseminating single-customer experiences
to wide audiences. These pieces of unstructured, The new market reality calls for a multi-modal
unpredictable, and vicarious information are linking approach to define and evaluate the nature of
current and potential customers like never before. competitive threats to a brand and set up a portfolio
Along the same lines, widely used rating and review of offense and defense systems. It also requires
systems are pitching products against competitors identifying the facilitators of brand adoption that
of all shapes and sizes (Zhu & Zhang, 2010). Simi- might belong to completely unrelated product mar-
larly, a multitude of recommender systems are cap- kets. In other words, the threat from traditional
turing browsing and purchase data to navigate competitors that vie for a share of the sales from
customers toward an ensemble of products that defy within the brands own category is only one aspect
conventional definitions of product markets or cat- of a brands competitive system. Various threats
egories (Ansari, Essegaier, & Kohli, 2000). For ex- and opportunities emerge from a variety of addi-
ample, systems deployed by large retailers from tional sources. These include influential, satisfied or
Amazon to Netflix are continuously evaluating cus- dissatisfied customers who have the power to sway
tomers product co-purchase and co-evaluation the preferences of many others, much more than
patterns and acting on them by building micro- the efforts of direct competitors (Mudambi &
promotion plans. Similarly, social interaction sites Schuff, 2010).
such as Facebook and Twitter are leveraging infor- The private label and category management
mation about inter-customer connectivity for systems set up by retailers are also threatening
product promotions. Finally, comparison-shopping brands as the adoption of store brands in one
systems are placing products among local competi- category is increasingly influencing the rejection
tive sets whose composition changes based on a of national brands in others. Moreover, a variety of
number of factors including the sorting mechanism online platformsincluding product evaluation,
employed by customers (Marmorstein, Grewal, & comparison, or recommender systemsare placing
Fishe, 1992). brands in a variety of competitive contexts across
The challenges to brands from increasing inter- which the portfolio of competitors is vastly differ-
connectivity go beyond the online world. The emer- ent. We suggest that it is time to stretch strategic
gence of retail power and private labels has raised a thinking and market planning by changing the defi-
new set of competitors for branded products. Prod- nition of a brands competition from just other
uct portfolio rationalization processes under way at brands present in its narrowly defined category.
big retailers including Wal-Mart and Kroger have It is more appropriate now to plan brand strategy
increased the cascading risk of discontinuation or across multiple ecosystems and think in terms of
elimination for many brands. The surviving brands webs of links with other products and customers
are by no means safe, however; they face headwinds that either facilitate or hinder the adoption or
from sophisticated brand and category management continued usage of the brand. In a world of multi-
systems that are being set up by the retailers modal competition, it is imperative to structure
themselves. brand strategy in terms of offensive and defensive
In this article, we suggest that the time has come moves within brand ecosystems rather than merely
for shifting the strategic brand management per- within product markets.
spective away from a product-market-based ap-
proach toward an ecosystems-based approach
(Tobias, 2007) both in real and virtual markets. 3. What are product ecosystems?
Brands have to manage themselves in the customer
ecosystem where the composition of advocates and A brand is a part of a larger product ecosystem when
adversaries changes by the moment. They also have the likelihood that it will be accepted by customers
to survive in the retail ecosystem where the struc- is linked, either positively or negatively, to the
ture of competition changes shape by the day. In likelihood of acceptance of other products that
Bringing product and consumer ecosystems to the strategic forefront 227

constitute the ecosystem. When there is a positive 3.1. Types of product ecosystems
linkage between two products in an ecosystem, an
increase in the customer acceptability of one will 3.1.1. Preference ecosystem
tend to have a favorable impact on the acceptability Perhaps the simplest form of a product ecosystem is
of the other. For example, the likelihood that a a preference ecosystem whereby the liking or desire
customer will buy icing is likely to be positively for one product translates into a liking or desire for
related to the likelihood of buying cake mix. The another. Many online platforms help their customers
same might be true for aluminum baking pans and traverse through a maze of products based on the
cake mix. We could therefore say that both icing and correlation exhibited by other customers between
baking pans belong to the product ecosystem of the the liking of one product and then another. For
cake mix. Of course, the strength of the relationship example, in our research, we examined the prefer-
of the two products with the cake mix might be ence ecosystem for Planet Earth: The Complete BBC
different depending on the likelihoods of joint pur- Series, a popular DVD set. We collected information
chase. When two products have a negative interde- from a well-known online sales platform to con-
pendence, the likelihood that one will be adopted struct the ecosystem for this DVD set using the
will reduce if customers adopt the second one. For underlying preference structure uncovered through
instance, if a customer buys cake mix, then the the tools of network analysis.
likelihood that she will buy brownie mix might The results from this analysis are interesting and
lessen. demonstrate the inter-relationships among poten-
The example above, while designed to illustrate tial customer preferences for the assortment of
positive and negative linkages in an ecosystem, movie titles that constitute the ecosystem for the
can also be interpreted in terms of product com- Planet Earth DVD set (Figure 1). We find that the
plements and substitutes. However, the power of Planet Earth: The Complete BBC Series ecosystem
ecosystem-based thinking comes to light when we consists not only of other nature-related documen-
consider larger assortments and all the direct and taries, but is also linked to commercial films through
indirect linkages around a core or nucleus. For Iron Man. We further examined the directional flow
example, sprinkles may be bought only if both of preferences among the elements within this eco-
the cake mix and icing are bought. Therefore, system. Two products that mutually influence the
sprinkles may belong to the cake mix ecosystem preference for each other can be thought of as having
but may be linked to the core product only indi- a bi-directional relationship. If only one product
rectly through icing. The logic can be generalized influences the preference for the other, the relation-
to examine larger ecosystems as networks of prod- ship will be uni-directional. In our analysis of the
ucts and services that exhibit some form of rela- ecosystem of Planet Earth: The Complete BBC Series,
tional dependence with regard to the likelihood of we discovered a bi-directional relationship with
adoption. Planet Earth and Blue Planet: Seas of Life and The

Figure 1. Planet Earth DVD ecosystem


228 M. Dass, S. Kumar

Figure 2. Panasonic car audio ecosystem

BBC High Definition Natural History Collection, but a category. For example, in the case we researched,
uni-directional relationship with the remaining the purchase of an advanced Logitech remote control
members of the ecosystem. was contingent on the purchase of the Panasonic
audio system and the Kenwood direct video cable.
3.1.2. Purchase ecosystem To that extent, the Logitech remote control had a
The second type is a purchase ecosystem whereby second-order linked relationship with the Panasonic
the purchase of one product or service changes the audio system. On the other hand, the Panasonic
likelihood of the purchase of another. The tradition- Bluetooth kit had a first-order direct and positive
al way to think about this issue is in terms of cross- relationship with the original audio system. The
selling across product categories. Firms in both the structure of the relationships among the other ele-
industrial and consumer sectors use a variety of ments of this ecosystem can be interpreted similarly.
initiatives, such as coupons or salesperson incen-
tives, to encourage customers to buy additional 3.1.3. Leapfrogging ecosystems
products or services once they have purchased a The third type is a leapfrogging ecosystem whereby
core product or service. For example, salespeople at customers pre-adoption preferences for a set of
electronics and computer stores are often incentiv- options may appear remarkably similar, but after
ized to sell extended warranty plans upon the pur- the adoption of one option, the preference for many
chase of products. In these cases, it is easy to see of the remaining others plummet. For example, a
that the sale of the extended warranty is contingent preference ecosystem for beaches on Floridas east
upon the sale of a core product but not the other coast may show a high degree of similarity and
way around. In terms of an ecosystem, we would say connectivity among many locations. In other words,
that the two exhibit a positive, uni-directional re- the liking for one beach may be highly correlated
lationship whose strength may vary across products with the liking for other beaches in the vicinity with
and retail stores. similar characteristics. However, once a customer
However, under current market conditions, it is visits one beach, the likelihood of adoption of
important for firms to understand and develop com- the remaining beaches may drop substantially.
plete purchase ecosystems by generalizing the notion On the other hand, the likelihood of a visit to a
of cross-selling. For illustrative purposes, we used beach on the states west coast may rise substan-
network analysis (Carrington, Scott, & Wasserman, tially. A leapfrogging ecosystem is therefore a con-
2005) to examine the purchase ecosystem for a Pana- tingent network whereby the adoption of one entity
sonic car audio system sold in the aftermarket adversely affects the preference for the others, so
(Figure 2). As one would expect, such a core purchase customers are likely to leapfrog over them to either
may set off a series of additional purchases in a another ecosystem or to a remote location within
variety of product categories in a specific sequence. the existing one.
Each of these products may belong to several other
product categories as defined conventionally. How- 3.1.4. Longitudinal ecosystems
ever, whether or not they are purchased depends Finally, there are unfolding or longitudinal ecosys-
on the series of linkages that they have with the tems whereby the likelihood of buying a product in
core product that belongs to a completely different the ecosystem evolves over time. Relationships
Bringing product and consumer ecosystems to the strategic forefront 229

Figure 3. A customer ecosystem

among the entities in an ecosystem are not static of individuals based on data collected from this site
but change as the customer acquires or chooses not (Figure 3).1 The structure of the network in Figure 3
to acquire other products that are part of the suggests that Mike is centrally connected in his
ecosystem. For example, consider a customer who friends networks and can reach a bigger audience
buys a laptop from a preferred brand. At the time through word-of-mouth than some of the others,
the purchase is made, there is an ecosystem that including Kris, Harry, and Angie. To that extent, prod-
surrounds the core product purchase. It might con- ucts and ideas promoted by Mike are likely to be
sist of a productivity suite, security software, a viewed by a greater number of members in this net-
printer, an external hard drive, a surge protector, work than those supported by less-connected mem-
or an enhanced pointing device. However, the eco- bers. Identifying such influential individuals in
system around the core product typically evolves customer ecosystems is becoming increasingly essen-
over time. For example, in an intermediate time tial for the efficient dissemination of marketing infor-
frame following the purchase, an enhanced security mation and the quick adoption of products. Similarly,
suite might enter the ecosystem, as might updates addressing the concerns of such individuals through
to the operating system. In these cases, a short-term either recovery efforts or proactively seeking their
assessment may not reveal the entire ecosystem and opinion is also becoming vital to prevent the spread
products and services may enter or exit the network of negative information that may be detrimental to
as the time frame under consideration is expanded. a brand.

4. What are customer ecosystems? 5. The evaluation of ecosystems


Customers, much like products, are also related to Fundamentally, an ecosystem consists of a set of
one another and form an ecosystem. These relation- entitiessay products or customersthat are
ships are based on a variety of factors including mutually interconnected based on preferences,
common backgrounds, interests, adoption and con- likelihoods of purchase, or similarity of interests.
sumption patterns, and overall goals. The information While there are many ways to analyze these relation-
shared by these customers across their respective ships, one simple way is to think of an ecosystem as a
networks shapes preferences and influences the ac- network of nodes and links. The characteristics of
ceptance or rejection of products, services, ideas, the network can then help assess the nature of
or causes. To that extent, the adoption process be-
comes contingent on the flow of information across
the customer ecosystem. An example of such an 1
The names of the network members are anonymized. This
ecosystem is a friends network on Facebook, the
ecosystem is based on actual data and is developed using the
popular social networking site. For illustrative pur- network software, PAJEK. A free copy of the software can be
poses, we constructed the ecosystem for a small group obtained from http://vlado.fmf.uni-lj.si/pub/networks/pajek/.
230 M. Dass, S. Kumar

Table 1. Category-based versus ecosystem-based strategic marketing


Current View Proposed View
Competitive Structure Category-based competitors defined in Ecosystem-based competitors defined
Analysis terms of entities belonging to a category based on contingent adoption

Market Segmentation Illustrates some form of similarity across Segmentation system based on the
consumer groups, but with respect to variations in personal ecosystems
the category in question

Brand Footprint Category-focused, thus underestimates Product ecosystem view expands the
the width of brand footprint horizon of brand footprints

Intra-brand Ecosystem Intra-brand relationships are defined in Intra-brand relationships are defined in
terms of issues of brand architecture terms of customer migration patterns

Promotion Planning Evaluation of the impact of a promotion Calls for evaluation of cascading effects of
is based on a comparison of a sale with promotion across multiple product
and without the promotion categories

New Product Silo-based and Isolationist focused on Ecosystem based thinking designed to
Development category-bound thinking designed to strengthen the linkages with downstream
increase the likelihood of own product contingent purchase to optimize sales
purchase across the ecosystem

Customer Valuation Value of customers based on purchase of Value of customers based on purchase of
own products products in the ecosystem

Strategic Alliances Strategic alliances are based on Strategic alliances are based on common
complementary capabilities interest to reinforce desirable customer
migration patterns

Market Research Market research used to understand Market research conducted to understand
customer preference in own categories customer adoption pathways and the
means to influence them

dependence among the nodes. For example, meas- product influences that of the other or the two are
ures of the centrality of a product can help identify generally adopted together. Finally, the analyses
whether it is isolated in the network or connected to can show the power of one entity over the others;
many other products within the ecosystem. The they can help the strategist understand the intensity
brand strategist can then assess whether the product of influence that one product in the network has on
serves as a central node that influences the adoption those it is connected with.
of other products or is a peripheral node whose
adoption is influenced by the adoption of those that
occupy a more central position in the network. Simi-
6. Ecosystems and strategic marketing
larly, the centrality of a customer within a network
Migration in strategic thinking from a category-
can provide analogous information about his or her
focused mindset to an ecosystem-based mindset
influence within the ecosystem.
Consider the car audio ecosystem depicted in may have profound implications for many aspects
of marketing practice. It is likely to significantly
Figure 2, which is developed based on data regard-
change the way we think of competition, customers,
ing online customer purchases. The ecosystem plot
marketing research and analytics, and marketing
shows a relatively central role for Kenwood KCA,
plans (see Table 1).
Panasonic Car Audio, and Panasonic Car CYBT1000
Bluetooth Kit because they connect to most other
products in the network. Network analyses can also 6.1. Competitive structure analysis
reveal whether the relationship between two prod-
ucts is uni-directional or bi-directional. This critical In the current, category-based system of strategic
information reveals whether the adoption of one thinking, competitors are defined as those that
Bringing product and consumer ecosystems to the strategic forefront 231

belong to the same product category and compete for in the development of customer segments. Under
a larger share of it (Srivastava, Alpert, & Shocker, the traditional marketing paradigm, a product
1984). Of course, as the definition of the category is market is defined as a category that consists of
relaxed, the competitive set becomes larger. But products or services that provide the same class
even then, the fundamental notion of competition of benefits to customers. Customers may exhibit
comes from some form of hierarchical category struc- variable preferences for the different attributes
tures. For example, if the category is defined nar- that define the products within the category.
rowly as diet colas, then Diet Pepsi may be seen as a Those whose preference structures are similar,
direct competitor to Diet Coke. However, as the who exhibit similar purchase patterns, or who
definition of the category is successively relaxed from respond similarly to marketing mix variables form
colas to non-alcoholic beverages to all beverages, a customer segment (Dickson & Ginter, 1987). In
regular Pepsi, Gatorade, V8, Aquafina, and Budweiser other words, the act of segmentation represents
may sequentially begin to emerge as competitors. carving out customer groups based on some form of
The underlying assumption is that each of these similarity, but only with respect to a defined cate-
products has the ability to negatively impact the sale gory. The net result is segmentation within a spe-
of the focal product, Diet Coke. cific category market. For example, there are
However, in an ecosystems-based approach, the segments within the personal computer market,
notion of competition is much broader and is not within the breakfast cereal market, or within the
confined by tight or loose category boundaries. It car market.
accommodates both positive and negative contribu- Because ecosystems transcend category bound-
tions from the sale of competing products to the sale aries, however, the conventional definition of cus-
of a focal product. Competition is therefore concep- tomer segments needs to be modified. While many
tualized in terms of a system of linkages in a network potential avenues are open for this modified ap-
that includes all products or services whose adoption proach, they all need to accommodate the variability
either increases or decreases the adoption of the in individual-level ecosystems across customers; that
focal product. In other words, competition is funda- is, they must acknowledge the potential variation in
mentally defined on the basis of contingent adoption, the inter-product networks across a customer pool.
and any product whose sale directly or indirectly For example, the purchase of popcorn may acceler-
influences the sale of the focal product through a ate the purchase likelihood of a cola for customers
set of linkages is a competitor. If the impact of the with loose budget constraints, but may decelerate it
contingency is positive, the competitor is reinforcing; for those with tight constraints. If we generalize
if it is negative, the competitor is detracting. For across an ecosystem, we will observe variations in
example, if popcorn facilitates the adoption of a the direction and strength of linkages among prod-
cola, it is a reinforcing competitor and may be labeled ucts or services across customers. A segmentation
a facilitator. Similarly, if a movie increases the sale of system should therefore be based on the variations in
popcorn, which in turn increases the sale of colas, the personal ecosystems rather than merely on variations
movie will be considered a reinforcing, indirect com- in preferences for attributes of products within a
petitor. On the other hand, if the sale of popcorn category.
negatively impacts the sale of nachos then the two
will be mutually detracting competitors. 6.3. Brand footprint
An ecosystem-based approach does not necessar-
ily substitute the conventional category-based no- From an ecosystems perspective, the footprint of
tion of direct competition. Rather, it adds a layer of many brands may be much wider than what would
products or services that influence the adoption of be estimated based on an evaluation of their impact
the focal product through a series of contingent within their core categories. Consider some of the
purchases. To that extent, it broadens the range popular products from Apple: The sale of an iPod,
of entities that affect the adoption of the focal iPhone, or iPad spurs the adoption of a wide variety of
product. Instead of characterizing competition as accessories from multiple unrelated categories. To
entities that have the potential to take away sales that extent, these brands have large footprints. A
from the focal product, it also considers those that similar phenomenon occurs in one product category
have the ability to enhance these sales levels. following the adoption of a new major kitchen appli-
ance, the purchase of a luxury brand of clothing, or
6.2. Market segmentation the adoption of organic food. The single adoption
within each of these categories often leads to the
A direct consequence of a change in the conceptuali- sequential sale of a subsequent set of loosely related
zation of competition is a corresponding modification products.
232 M. Dass, S. Kumar

This phenomenon requires new ways of concep- their brand ecosystems such that they can regulate
tualizing and estimating brand footprints. The con- their marketing efforts toward inducing and navi-
ventional way of evaluating the footprint of Tide gating customers through their brand portfolios.
within the laundry detergent category, or of Coca
Cola within the carbonated beverages category, may 6.5. Promotion planning
be underestimating their true impact (Aaker, 1991).
For example, national brand managers today worry Frequent price promotions or the use of other tem-
about the impact of private labels. The adoption of porary sales-boosting devices is common across
one private label product has a cascading effect on many product markets. The underlying rationale
the adoption of many others across multiple product is that a short-term incentive induces some cus-
categories and the emergence of private label eco- tomers to change brands, buy extra quantity, or
systems. Under a conventional, category-based ap- buy sooner than planned (Gupta, 1988). The net
proach, a private label within the paper towel result is a short-term increase in the sale of the
category will not be considered a competitor of a promoted brand. The metrics for evaluating the
national brand of peanut butter. However, under the impact of a promotion are therefore also based on
ecosystems-based approach, if the adoption of a a comparison of the sales with and without the
private label paper towel increases the likelihood promotion.
of adoption of private label peanut butter, then it However, if products are related and form an
may serve as an indirect competitor to a national ecosystem, the impact of a promotion may once
brand peanut butter, and be partly responsible for again cascade across multiple product categories.
its loss of sales volume. Overall, brands and even The effect could either be facilitating or detracting.
private labels today are part of larger ecosystems As a facilitator, the promotion in one category could
and have larger footprints that go beyond their own help release a budget constraint whereby savings
categories and affect out-of-category brands. can potentially be spent on related or unrelated
products. For example, a temporary price discount
6.4. Intra-brand ecosystem on a laptop computer might result in the purchase of
related products, such as an external hard drive, or
Much like in the case of a brand footprint, the eco- unrelated products, such as a leather jacket. On the
system-based approach should change the strategic other hand, if a promotion induces an unplanned
thinking surrounding a brands own portfolio. From a purchase, it might restrict money that would have
diagnostic perspective, it is important for brand otherwise been spent elsewhere. For example, a
managers to recognize the linkages among the promoted appetizer on a restaurant menu may be
various products in their portfolio and assess the bought spontaneously and thereby reduce the likeli-
structure of their brand networks. They should assess hood of a dessert purchase. Once again, if we extend
the location of the nuclei or hubs in the relevant these examples to larger networks, we would find
ecosystems and the linkage of their own brands to that the effects of promotions cascade across larger
them. They should also determine whether custom- ecosystems and influence the purchase likelihood
ers leapfrog within their own brand portfolio and of products beyond known category boundaries.
the variations in these leapfrogging patterns across Promotion planning and measurement of the effec-
customers. For example, it is widely believed that tiveness of promotions will therefore need to be
the introduction of music players, and subsequent- significantly modified to accommodate the realities
ly the iPhone, has changed how customers enter of an ecosystem-based marketing approach.
Apples brand portfolio and later adopt its other
products. Therefore, the nucleus of the Apple 6.6. New product development
product portfolio may change from personal com-
puters, to music players, to phones, and potentially The current new product development system is
to tablets. Concurrently, the structure of the total silo-based and isolationist; it does not recognize
product ecosystem within the Apple portfolio may the importance of category inter-connectedness
evolve as well. Products that were perhaps the and the existence of product ecosystems. The de-
nucleus at a point in time (e.g., computers) may velopment of new product concepts and the accept-
evolve to become peripheral products in its net- reject criteria for ongoing projects are consequent-
work. In other words, the sale or adoption of ly based on category-bounded thinking (Madhavan &
Apples computersonce its coremay become Grover, 1998). The result is that new products which
contingent on customer adoption of a sequence could potentially spawn new ecosystems are under-
of other Apple products. Overall, it becomes im- rated, while those that promise to dominate within
portant for other multi-product firms to understand their category bounds are well supported.
Bringing product and consumer ecosystems to the strategic forefront 233

Under an ecosystem-based thinking, new prod- suppressing the migration to nodes that detract from
ucts would not be developed in isolation and would the focal brand. Because these nodes may belong
not be evaluated based on potential profitability to multiple different categories, brands may need to
within their narrow categories. They would instead form out-of-category strategic alliances in order
be developed with additional objectives that em- to jointly navigate customers to nodes that have
phasize the strengthening of linkages within existing synergistic benefits for alliance partners.
ecosystems or building new ones. They would be
configured to optimize around an entire ecosystem 6.9. Market research
rather than around their individual categories. This
might lead to a radically different prioritization of Finally, the market research mandate will need to
products and the criteria for evaluation. For exam- evolve in an ecosystem-based approach to market-
ple, in an ecosystem, the purchase of a dress might ing. A new purpose of marketing research will be to
induce the purchase of a piece of jewelry, which understand the interconnected pathways that link
might cue the purchase of a pair of shoes, which the focal brand to entities that define its ecosys-
might cue the purchase of another dressall from tem. Marketers will need to know the preference,
the same retailer. The key question under such adoption, leapfrogging, and evolutionary ecosys-
circumstances is the configuration of the first dress. tems for their brands, as well as their relationships
Under the conventional paradigm, it would be de- to customer ecosystems. They must understand
signed to increase the likelihood of its own pur- how the existing and potential ecosystems may
chase. Under the new approach, however, it be used to direct their promotional efforts, new
would need to be designed to also strengthen link- product development, and strategic alliances. The
ages with downstream contingent purchases in tools and concepts used for market research will
order to optimize sales across the entire ecosystem therefore need to transcend within-category think-
rather than merely within its own category. Alter- ing and embrace multi-category, ecosystem-based
natively, it could be designed to increase the likeli- thinking.
hood of its adoption in another ecosystem where it is
currently a peripheral product.
7. Developing an ecosystem
6.7. Customer valuation orientation

An ecosystem-based marketing approach not only The transition to an ecosystem-based world re-
changes how markets are segmented, but also how quires a shift in the firms strategic mindset from a
customers are valued. For example, the ecosystem category orientation to an ecosystem orientation.
for the Planet Earth DVD set consists of 36 potential This is a major transformation that will have to be
products that customers have some likelihood of initiated by top management and cascade down
buying. Under the ecosystem-based approach, the throughout the rest of the organization. Members
value of the customer will be assessed over the of the executive suite will have to recognize the
entire ecosystem, not just the focal product or even nature of the changing competitive landscape and
the set of similar products that the customer is likely the need to strategize beyond category bound-
to buy. The new approach will change how high aries. They will be required to be ready to make
versus low priority customers are determined, and radically different resource allocation decisions to
which specific products are promoted to each in strengthen the position of their offerings within
order for them to profitably navigate through the larger ecosystems, potentially at the expense of
ecosystem. losing within-category dominance. They will need
to train themselvesand also those in the larger
6.8. Strategic alliances organizationto think differently about the new
meaning of competition, the evolving notion of
Under an ecosystem-based strategic mindset, com- strategic positioning within networks, the new
petition is not defined in terms of category bound- tools of market research, and the expanded scope
aries; rather, it is conceptualized in terms of of strategic alliances. Those who do so will win the
facilitating and detracting linkages. These linkages larger battle of ecosystems, and those who dont
can be to products in widely different product will be left to fight smaller battles within their
categories. Under this new paradigm, offense would narrow categories.
be defined in terms of getting customers to nodes To implement an ecosystem-based strategy, those
that have a strong facilitating impact on ones own in the executive suite will need to make organiza-
brand. Defensive strategies would be executed by tional design changes and re-define brand/marketing
234 M. Dass, S. Kumar

managers scope of responsibility. Under the current merely with greater shares of narrowly defined
category-centric organizational structures, a firms product categories. A change in the strategic mind-
business lines are divided into smaller categories or set, a modification of the organizational structure
sub-categories that are each managed by a cross- and responsibilities, and a re-alignment of the
functional brand management team. These brand- compensation system will help organizations devel-
based silos often have limited interaction across op an ecosystem orientation and implement strate-
them. In other words, multi-product firms are often gies based on it.
analogous to holding companies that merely provide
shared financial resources to a group of quasi-
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