GILASTATE

Well, Google has announced their plans in the wireless phone space.  I have to say I am a bit underwhelmed at this point. Their press release reads like any of numerous other alliances or consortiums where a bunch of firms are getting together to try exploit some market opportunity. While Eric Schmidt says this alliance of over 34 firms is more ambitious than any single phone, I have to say I would have preferred to see an actual gPhone. Any time 34+ firms are getting together to do anything, I’ve learned to not expect much in terms of actual output. Google has typically been fairly aggressive in rolling out new services, so perhaps they will prove me wrong.

Digital music offers an interesting example to evaluate the differences between product and service-centric perspectives on marketing.

What would a traditional product-centric marketing perspective say about a digital music file? Classically, it would say a music file is something the producer has infused value into through the encoding of music into the unique bits that are the file. The bits that make up the digital music file are the value and a customer receives that value from these bits once they possess and use them. Widgets are a great example of this viewpoint in action. While fictional, when you discuss a hypothetical product you can refer to it as a widget and then discuss all the processes to get the widget to the customers. Once the customers received the widget, they also received the value that was “infused” into the widget during the production process.

A service-centric perspective would view the digital music file as merely a conduit to connect the consumer with the producer of the music (think about a band). The band doesn’t just produce music files which contain value, but rather the music files provide a linkage where the consumer and band co-create value. The music file doesn’t actually have any value other than in its ability to optimize this connection between the band and the consumer of the band’s music.

An example may help with this somewhat abstract notion of value creation. My interest in a particular band is a complex set of interrelationships between the music the band creates and my musical preferences. I am not typically going to buy a song sight unheard. I need to have some idea that the band’s music is something I would like. I might think I would like their music because I heard it on the radio, liked their previous music, or heard a sample at the online music store. Basically, my opinion on a particular band is based on interactions with the band. These interactions can be asynchronous as is the case in listening to recorded music or synchronous when I attend a live performance. The purchasing and use of a particular music file is not a discrete event, but rather a single point in an extended set of interactions between me and the band that determine the value I receive from the entire co-creation process.

So, the digital file itself is only a conduit between the band’s performance and and my appreciation of that performance. While this distinction may seem overly complex, it actually has very real implications for how to market digital music products. I’ll discuss these differences in my next post.