As discussed in class, businesses use a combination of techniques in their quest to be profitable. These techniques are also employed, of course, within the wedding industry. These techniques include network effects, lock-in and switching costs, price discrimination, and versioning and bundling. This week, I will discuss two of the techniques – network effects and versioning and bundling

Network effects, or network externalities, are the effects that one user of a good or service has on the value of that product to other people. As the user base continues to grow, more and more users are likely to purchase the product or service. Within the wedding industry, trends change over time. Various wedding related products and services have gained popularity through network effects – bridal shows, bridal magazines, wedding planners, etc. Websites have also gained popularity. At some point in time, a bride and groom decided that it would be helpful to them and their guests to have all wedding information in one accessible place. Today, almost every bride and groom create a personalized wedding website, and this is evident in the stock market. On May 7th, eWedNews posted that “the The Knot, Inc ( NASDAQ:KNOT) stock price jumped on the news they had beaten expectations yesterday. The news led to an upgrade from neutral to buy and was cause for celebration at a time when the wedding business has little to cheer. Shares of the Knot were up nearly 7% in late day trading (8.30) on the positive earning news, despite a record 1000 point decline yesterday” (http://www.ewednews.com/post.cfm/the-knot-numbers-beat-expectations-but-fail-to-wow-advertisers).

Another clear example of network effects is with the growth in popularity of cell phone applications. Interestingly, according to eWedNews, the wedding industry has not yet taken advantage of cell phone apps! Since 2009, eWedNews has been tracking the information and progress of My Wedding Concierge in San Diego. Owner of the company, Phyllis Cheng has compiled some iPhone application stats: “the number of iPhone apps exceeds 190,000. The number of iPhone just surpassed 50 million. The number of apps downloaded is over 4 billion. The number of iPads sold: close to 1,000,000-- The number of wedding apps? Less than 50,” says Cheung.

“Simply put, this only means there is more room for growth and expansion in the very near future,” feels Cheung. According to Phyllis, her company is the only one producing custom iPhone/iPad apps for wedding vendors. Cheung reasons, “We've had vendors say there are too many apps. Every app will find a target audience. But people are still building websites aren't they? There are currently over 230 million websites already but the app market is just getting started” (http://www.ewednews.com/post.cfm/phone-apps-exploding-but-not-in-the-us-wedding-business).

I expect that as iPhones become even more popular, there will be an increase in the number of wedding apps… network externalities case in point!

Another important method for businesses to be profitable is versioning and bundling. Buyers often shop for more than one product – especially when planning a wedding! Companies use the method of versioning and bundling to:
• shield themselves from price pressure
• create a complete solution to meet the buyer’s needs
• reduce the number of entities that the buyer must interact with when doing business
• create strategic alliances

One of the first examples that comes to mind is the strategic alliance created by David’s Bridal and Men’s Warehouse. Brides and grooms can easily coordinate the attire of their wedding party members with their alliance. If the bride chooses the color she would like the bridesmaids to wear, she can match the exact color to the tuxedos of the groomsmen. David’s Bridal and Men’s Warehouse use the same color swatches. This alliance creates an easy option for brides and grooms when choosing the bridal party attire. The bride and groom will only need to interact with two vendors to coordinate clothing for the day, rather than worrying if the colors will match. This was a very smart business decision for both companies.

Men’s Warehouse offers tuxedo deals in the form of a bundle. The groom can choose from the following options: “Get your choice of a free tuxedo or suit to keep (up to a $400 retail value) of a free tuxedo rental (up to a $149.99 retail value) with five paid rental packages. Get an additional free tux rental with ten paid rental packages” (http://www.menswearhouse.com/). With these options to outfit the men in the bridal party, who would shop elsewhere?

Of course, it is necessary to market these alliances and bundles to be profitable. I have seen both of these techniques marketed in numerous forms: in each respective store, at bridal shows, on their respective websites and even in targeted emails. All in all, the techniques discussed above are essential to making businesses profitable.

While researching many of the industries noted in the last blog entry (planning checklists, venues, invitations, wedding apparel, jewelers, photographers, catering, florists, etc), I began to notice wedding-related advertisements as I was browsing on Facebook – everything from invitations to a chuppah for a Jewish wedding. Coincidentally, these were items I had recently searched for on the internet, via Google. I was curious to find out how Facebook could possibly “know” that I was planning a wedding – and try to influence by purchases by appearing on my computer screen.

It turns out that these ads are part of an innovative web-based advertising approach. According to the article Competing on Analytics with External Processes, there are a variety of web-based advertising approaches, including banners, pop-ups and search-based ads. As I experienced, search-based ads are becoming one of the most powerful forms of online advertising. As noted in the article, by having the industry-leading search engine, Google can serve ads that correspond to search terms used by people browsing the internet.

Google is successful with advertisers through its use of analytics. Competing on Analytics explains that Google “employs self-learning algorithms that analyze the efficacy of different keywords, etc” to be used in an optimization engine that develops suggestions for advertisers. Google’s philosophy is that analytics and metrics will make advertisers more successful in working with the company, so they try to provide this analytical information to advertisers. This advertising synergy has contributed to much of Google’s growth.

Google’s strategy is working…their optimization engine has suggested to various advertisers that they should target me for various wedding related products and services. Admittedly, I have clicked on a few of the ads that piqued my interest, but I have yet to purchase a product as a result of the search-based ads.

Technology can drive online business in other ways. As I mentioned last time, we chose to use www.wedding.channel.com for our wedding website. On this site, we listed critical information for our guests, including airline and hotel information. This information can be used to make transactions which can easily be made online. An additional section of the wedding website includes a link (or links) to the couple’s wedding registry. Perhaps one of the biggest money-makers in the wedding industry is related to the idea of the gift registry.

We registered at three stores, prior to selecting our wedding website. Interestingly, when we formatted the wedding website, the links to the registry at each store appeared on our page. As a result, our guests can review our wedding registry in the comfort of their own homes. With the ease of online shopping, people do not need to go to the same stores in person. Often, when one visits the stores in person, he or she might find that certain products are only available online! As an additional perk of shopping online, there are sometimes online codes, coupons or deals to entice the buyer to purchase online instead of in person.

In addition to making things easy for our guests, the wedding website and online registries have made things easier for us too. For example, in the midst of the snowstorms in February, we used the time to register online. We were productive during the storms, and we did not need to venture outside! We recently moved, and decided that we did not need some of the items for we had previously registered. It was very simple to go online, sign in and remove specific items from the list. I would certainly recommend www.weddingchannel.com as a host site for a wedding website as well as creating and maintaining wedding registries online!

Wedding Websites - are they really beneficial to businesses?

As I mentioned in the previous post, I have found technology to be extremely useful in planning our wedding. From the moment we got engaged, technology has served as a way to organize all of the tasks that need to be completed in planning a wedding. It is easy to become overwhelmed with everything involved in the wedding industry – especially online.

According to www.weddingbusinesstoday.com, the average wedding budget in 2009 was just over $28,000. If there are well over two million weddings that occur in the United States each year (www.theweddingreport.com), the wedding industry is certainly a lucrative business. As mentioned, it can be confusing to begin a wedding search online. If one searches for “online wedding services,” a site called www.topweddingsites.com emerges. I am most familiar with planning sites such as www.theknot.com (The Knot) and www.weddingchannel.com (Wedding Channel), but interestingly they were not listed among the first sites on www.topweddingsites.com. It is likely that those two sites did not invest in advertising on www.topweddingsites.com. In fact, The Knot and Wedding Channel are substitutes for www.topweddingsites.com, and it would not make sense for them to list information on that site.

One of the first tasks in planning the wedding was to use technology and develop a wedding website – one site where pertinent wedding information is stored and can be communicated to guests. When “Googling” wedding host sites, more than a few sites appear in the search results. We chose to use www.weddingchannel.com in an effort to use a site different than many of our friends. In addition to serving as a site for wedding guests, these sites give people planning weddings a host of industries to explore: planning checklists, articles about budgeting, venues, invitations, wedding apparel, local vendors (jewelers, photographers, catering, florists, etc), honeymoons and links to gift registries. As one can imagine, each industry mentioned is a major driver of the economy.

Advances in technology are changing the way businesses services are created and delivered. Ten years ago, I believe that people who were planning weddings would not have had nearly as much access to various vendors and businesses needed to plan the wedding. Today, it is as simple as spending some time in front of the computer researching businesses of choice.

Many of the wedding websites have developed rating systems for various services – affecting the way business is delivered and the way that customers react toward businesses. My fiancé and I researched several entertainment brokers online to find a band for the wedding. We found a specific broker on www.weddingwire.com that we liked, and we set up time to meet in person. One of the reasons that we decided to meet with Chris was that my fiancé found positive reviews of his business listed on the site. The broker with whom we met shared with my fiancé that he decided to pay for advertising on the two wedding websites on which he was already listed and receiving positive feedback. If he advertised on those sites, I believe that his ratings would appear even higher. I found this to be an interesting marketing tactic for him. I would have listed ads on sites where I was not yet listed, in an effort to reach more customers. However, his marketing tactics worked for us- we have decided to move forward with Chris. If we’re satisfied with his service of providing a band for the wedding, then we will need to rate his business positively after our wedding. Perhaps our positive rating will help someone else to select him as their entertainment broker.

Certainly rating systems published online are not always beneficial for businesses. While researching potential entertainment brokers, we consistently found negative reviews for one band, specifically of the band leader. We mentioned this negative rating to Chris, the entertainment broker with whom we met, and they are friendly. Chris explained why his friend may have received negative ratings. This example should serve as a warning – consumers should be wary of ratings online. Online ratings can certainly help guide where one may take his or her business, but perhaps a conversation is warranted before automatically ruling out those services.

Friday, April 9, 2010

Intro

Greetings and thank you for visiting my blog! My name is Mary Drey, and over the course of the next seven weeks I plan to investigate information technology and its business implications within the wedding planning industry. I'm getting married on October 24, 2010, and am in the midst of planning for this exciting day. Thus far I have found technology to be very useful, and I look forward to sharing this information.