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Birchbox
Kiehl’s,
L’Oreal Paris,
In other words, Kiehl’s has decoupled the replenishment of beauty products, siphoning off repeat customers from Sephora.
Tesla’s success at claiming market share from big auto companies didn’t involve decoupling. Rather, Tesla attempted to compete by offering a qualitatively different product: a high-end electric car.
By contrast, I’ve assumed so far that decouplers and incumbents offer activities of essentially the same quality.*7
Likewise, if the quality of a gaming experience or beauty product purchased from an incumbent or disruptor is not materially different, these are cases of decoupling. If the difference in the quality of a product or service is large enough to account for the customer’s choice, then decoupling might not be the sole phenomenon at play.
we might wonder what determines the customer’s final decision. The answer is cost.
Consumers incur costs in every stage of the CVC. Costs include not just the item’s price but also such non-monetary costs as the effort required to identify and select items (search costs), the effort to order and receive items (purchase costs),*8 and the effort to use and dispose of items (usage costs).
Amazon lowers sear...
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Dollar Shave Club, a subscription service, lowers purchasing costs,
Turo lowers usage costs.
They save the inconvenience and expense of buying and maintaining their own cars.
We can calculate monetary costs measured in dollars (price, loan fee, shipping charges, etc.), time costs in hours or days (e.g., time to delivery, time spent purchasing), and effort costs through elementary information processes (EIPs)—cognitive steps that account for how consumers evaluate their options, decide to pay, and so on.
Lending Tree
Zopa
Y...
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Min...
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Remember, whatever business you are in, your customers always pay you with three “currencies”: their money, their time, and their effort.
CALCULATING COST DIFFERENCES
If we can understand precisely where customers experience costs, we can find places where customers might want to decouple.
with
You first consider the monetary costs.
run
To be as a cost for; cost: Those hotel rooms can run you hundreds of dollars a night.
But what about the effort that purchasing at either vendor will
require of you?
EIPs).
Elementary Infomation Process (EIP)
you also would have to search the site’s online inventory for the same make and model (one additional EIP).
In sum, the cost of decoupling (choosing the fridge at Walmart but going to Amazon.com to buy it) is –$140 + 2 days + 1 EIP.
Well, that depends on what you value most as a consumer.
How sensitive are you to price, time, and effort?
Customers intuitively or deliberately assess the monetary, time, and effort costs they would accrue when dealing with disruptors or incumbents.
How much money, time, and effort must your customer expend to do business with your company?
How much must she expend with a disruptor? Does the difference run in your favor or against you?
leave it at that.
leave it at that ~abstain from further comment or action • if you are not sure of the answers, say so, and leave it at that.
Eventually, though, customer decisions catch up to the reality of the underlying costs. The purpose of this analysis is to shed light on this reality.
The three costs I’ve mentioned—money, time, and effort—are not necessarily the only costs to consumers. Another common cost is risk-related costs (e.g., trust, reliability, transparency, and uncertainty).
One well-established way to measure the trust, reliability, and uncertainty of a company’s offerings is to consider the company’s brand equity.
Of course, brands and brand equity only go so far.
Furthermore, in many cases, an incumbent’s well-regarded brand does indeed reflect consistently lower monetary, time, or effort costs to the customers.
were it not for cheaper, faster, less effortful transactions.
When in doubt, ask customers what they value most. Learn the costs they care about when making purchase decisions—not just some of the...
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In assessing additional classes of costs beyond money, time, and effort, scrutinize them closely.
As we’ve seen, customers really do drive a great deal of the disruption we see unfolding all around us.
In the hospitality industry, who really matters most when it comes to disruption—Airbnb, or the customer’s changing habits?
In other words, the underlying customer trend would remain intact. A similar argument holds in any number of other industries where disruption has occurred.
Only when entrepreneurs recognized this desire and introduced an offering that attempted to satisfy it did a successful disruptor unsettle the market. To get ahead of disruption, executives of established companies need to focus more attention on customers and less on the startups they regard as their competitors.
Map the stages of your customer’s CVC to discover where you create value, where you charge for it, and where you sometimes erode it. Then ask yourself three questions: (1) Can you deliver more value in the value-creating activities without charging more? (2) Can you afford to capture less in the value-charging activities, everything else being equal? (3) Can you reduce eroded customer value without diminishing what you’re offering or capturing?
cry foul
When your customer has the option of decoupling a piece of your business, this assumption no longer holds.
