Business Horizons (2014) 57, 225234

Available online at www.sciencedirect.com

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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
Interconnect and succeed or wither away alone:
That seems to be one of the emerging themes across
various parts of the business landscape. But how to
* Corresponding author
E-mail addresses: mayukh.dass@ttu.edu (M. Dass),
shivina@yahoo.com (S. Kumar)
front of all market-based strategic thinking remains
an open question. While it is becoming increasingly
apparent to strategists that it is virtually impossible
to build successful products by thinking of markets in
isolation, ecosystem-based strategic processes have
not yet evolved in the majority of corporations.
For example, while most executives acknowledge
the inter-connectivity among customers, as well as
the interdependence among unrelated product cat-
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
translated itself into a coherent strategic approach
that takes advantages of these inter-customer and
inter-product linkages.
However, the signs of inter-connectedness are
unmistakable. Customers are leveraging the power
of social media to learn about and disseminate
information regarding their purchase and service
experiences (Kaplan & Haenlein, 2010: Mangold &
Faulds, 2009). Posts on blogging and micro-blogging
sites are disseminating single-customer experiences
to wide audiences. These pieces of unstructured,
unpredictable, and vicarious information are linking
current and potential customers like never before.
Along the same lines, widely used rating and review
systems are pitching products against competitors
of all shapes and sizes (Zhu & Zhang, 2010). Simi-
larly, a multitude of recommender systems are cap-
turing browsing and purchase data to navigate
customers toward an ensemble of products that defy
conventional definitions of product markets or cat-
egories (Ansari, Essegaier, & Kohli, 2000). For ex-
ample, systems deployed by large retailers from
Amazon to Netflix are continuously evaluating cus-
tomers product co-purchase and co-evaluation
patterns and acting on them by building micro-
promotion plans. Similarly, social interaction sites
such as Facebook and Twitter are leveraging infor-
mation about inter-customer connectivity for
product promotions. Finally, comparison-shopping
systems are placing products among local competi-
tive sets whose composition changes based on a
number of factors including the sorting mechanism
employed by customers (Marmorstein, Grewal, &
Fishe, 1992).
The challenges to brands from increasing inter-
connectivity go beyond the online world. The emer-
gence of retail power and private labels has raised a
new set of competitors for branded products. Prod-
uct portfolio rationalization processes under way at
big retailers including Wal-Mart and Kroger have
increased the cascading risk of discontinuation or
elimination for many brands. The surviving brands
are by no means safe, however; they face headwinds
from sophisticated brand and category management
systems that are being set up by the retailers
themselves.
In this article, we suggest that the time has come
for shifting the strategic brand management per-
spective away from a product-market-based ap-
proach toward an ecosystems-based approach
(Tobias, 2007) both in real and virtual markets.
Brands have to manage themselves in the customer
ecosystem where the composition of advocates and
adversaries changes by the moment. They also have
to survive in the retail ecosystem where the struc-
ture of competition changes shape by the day. In
M. Dass, S. Kumar
addition, they must protect their pricing power that
is being ceded to comparison engines and shopping
robots. Of course, none of this takes away from the
strategic imperative to ward off traditional com-
petitors from within their own, traditionally defined
product categories.
2. Thinking about ecosystems
The new market reality calls for a multi-modal
approach to define and evaluate the nature of
competitive threats to a brand and set up a portfolio
of offense and defense systems. It also requires
identifying the facilitators of brand adoption that
might belong to completely unrelated product mar-
kets. In other words, the threat from traditional
competitors that vie for a share of the sales from
within the brands own category is only one aspect
of a brands competitive system. Various threats
and opportunities emerge from a variety of addi-
tional sources. These include influential, satisfied or
dissatisfied customers who have the power to sway
the preferences of many others, much more than
the efforts of direct competitors (Mudambi &
Schuff, 2010).
The private label and category management
systems set up by retailers are also threatening
brands as the adoption of store brands in one
category is increasingly influencing the rejection
of national brands in others. Moreover, a variety of
online platformsincluding product evaluation,
comparison, or recommender systemsare placing
brands in a variety of competitive contexts across
which the portfolio of competitors is vastly differ-
ent. We suggest that it is time to stretch strategic
thinking and market planning by changing the defi-
nition of a brands competition from just other
brands present in its narrowly defined category.
It is more appropriate now to plan brand strategy
across multiple ecosystems and think in terms of
webs of links with other products and customers
that either facilitate or hinder the adoption or
continued usage of the brand. In a world of multi-
modal competition, it is imperative to structure
brand strategy in terms of offensive and defensive
moves within brand ecosystems rather than merely
within product markets.
3. What are product ecosystems?
A brand is a part of a larger product ecosystem when
the likelihood that it will be accepted by customers
is linked, either positively or negatively, to the
likelihood of acceptance of other products that
Bringing product and consumer ecosystems to the strategic forefront
constitute the ecosystem. When there is a positive
linkage between two products in an ecosystem, an
increase in the customer acceptability of one will
tend to have a favorable impact on the acceptability
of the other. For example, the likelihood that a
customer will buy icing is likely to be positively
related to the likelihood of buying cake mix. The
same might be true for aluminum baking pans and
cake mix. We could therefore say that both icing and
baking pans belong to the product ecosystem of the
cake mix. Of course, the strength of the relationship
of the two products with the cake mix might be
different depending on the likelihoods of joint pur-
chase. When two products have a negative interde-
pendence, the likelihood that one will be adopted
will reduce if customers adopt the second one. For
instance, if a customer buys cake mix, then the
likelihood that she will buy brownie mix might
lessen.
The example above, while designed to illustrate
positive and negative linkages in an ecosystem,
can also be interpreted in terms of product com-
plements and substitutes. However, the power of
ecosystem-based thinking comes to light when we
consider larger assortments and all the direct and
indirect linkages around a core or nucleus. For
example, sprinkles may be bought only if both
the cake mix and icing are bought. Therefore,
sprinkles may belong to the cake mix ecosystem
but may be linked to the core product only indi-
rectly through icing. The logic can be generalized
to examine larger ecosystems as networks of prod-
ucts and services that exhibit some form of rela-
tional dependence with regard to the likelihood of
adoption.
Figure 1. Planet Earth DVD ecosystem
227
3.1. Types of product ecosystems
3.1.1. Preference ecosystem
Perhaps the simplest form of a product ecosystem is
a preference ecosystem whereby the liking or desire
for one product translates into a liking or desire for
another. Many online platforms help their customers
traverse through a maze of products based on the
correlation exhibited by other customers between
the liking of one product and then another. For
example, in our research, we examined the prefer-
ence ecosystem for Planet Earth: The Complete BBC
Series, a popular DVD set. We collected information
from a well-known online sales platform to con-
struct the ecosystem for this DVD set using the
underlying preference structure uncovered through
the tools of network analysis.
The results from this analysis are interesting and
demonstrate the inter-relationships among poten-
tial customer preferences for the assortment of
movie titles that constitute the ecosystem for the
Planet Earth DVD set (Figure 1). We find that the
Planet Earth: The Complete BBC Series ecosystem
consists not only of other nature-related documen-
taries, but is also linked to commercial films through
Iron Man. We further examined the directional flow
of preferences among the elements within this eco-
system. Two products that mutually influence the
preference for each other can be thought of as having
a bi-directional relationship. If only one product
influences the preference for the other, the relation-
ship will be uni-directional. In our analysis of the
ecosystem of Planet Earth: The Complete BBC Series,
we discovered a bi-directional relationship with
Planet Earth and Blue Planet: Seas of Life and The
228
Figure 2. Panasonic car audio ecosystem
BBC High Definition Natural History Collection, but a
uni-directional relationship with the remaining
members of the ecosystem.
3.1.2. Purchase ecosystem
The second type is a purchase ecosystem whereby
the purchase of one product or service changes the
likelihood of the purchase of another. The tradition-
al way to think about this issue is in terms of cross-
selling across product categories. Firms in both the
industrial and consumer sectors use a variety of
initiatives, such as coupons or salesperson incen-
tives, to encourage customers to buy additional
products or services once they have purchased a
core product or service. For example, salespeople at
electronics and computer stores are often incentiv-
ized to sell extended warranty plans upon the pur-
chase of products. In these cases, it is easy to see
that the sale of the extended warranty is contingent
upon the sale of a core product but not the other
way around. In terms of an ecosystem, we would say
that the two exhibit a positive, uni-directional re-
lationship whose strength may vary across products
and retail stores.
However, under current market conditions, it is
important for firms to understand and develop com-
plete purchase ecosystems by generalizing the notion
of cross-selling. For illustrative purposes, we used
network analysis (Carrington, Scott, & Wasserman,
2005) to examine the purchase ecosystem for a Pana-
sonic car audio system sold in the aftermarket
(Figure 2). As one would expect, such a core purchase
may set off a series of additional purchases in a
variety of product categories in a specific sequence.
Each of these products may belong to several other
product categories as defined conventionally. How-
ever, whether or not they are purchased depends
on the series of linkages that they have with the
core product that belongs to a completely different
M. Dass, S. Kumar
category. For example, in the case we researched,
the purchase of an advanced Logitech remote control
was contingent on the purchase of the Panasonic
audio system and the Kenwood direct video cable.
To that extent, the Logitech remote control had a
second-order linked relationship with the Panasonic
audio system. On the other hand, the Panasonic
Bluetooth kit had a first-order direct and positive
relationship with the original audio system. The
structure of the relationships among the other ele-
ments of this ecosystem can be interpreted similarly.
3.1.3. Leapfrogging ecosystems
The third type is a leapfrogging ecosystem whereby
customers pre-adoption preferences for a set of
options may appear remarkably similar, but after
the adoption of one option, the preference for many
of the remaining others plummet. For example, a
preference ecosystem for beaches on Floridas east
coast may show a high degree of similarity and
connectivity among many locations. In other words,
the liking for one beach may be highly correlated
with the liking for other beaches in the vicinity with
similar characteristics. However, once a customer
visits one beach, the likelihood of adoption of
the remaining beaches may drop substantially.
On the other hand, the likelihood of a visit to a
beach on the states west coast may rise substan-
tially. A leapfrogging ecosystem is therefore a con-
tingent network whereby the adoption of one entity
adversely affects the preference for the others, so
customers are likely to leapfrog over them to either
another ecosystem or to a remote location within
the existing one.
3.1.4. Longitudinal ecosystems
Finally, there are unfolding or longitudinal ecosys-
tems whereby the likelihood of buying a product in
the ecosystem evolves over time. Relationships
Bringing product and consumer ecosystems to the strategic forefront
Figure 3. A customer ecosystem
among the entities in an ecosystem are not static
but change as the customer acquires or chooses not
to acquire other products that are part of the
ecosystem. For example, consider a customer who
buys a laptop from a preferred brand. At the time
the purchase is made, there is an ecosystem that
surrounds the core product purchase. It might con-
sist of a productivity suite, security software, a
printer, an external hard drive, a surge protector,
or an enhanced pointing device. However, the eco-
system around the core product typically evolves
over time. For example, in an intermediate time
frame following the purchase, an enhanced security
suite might enter the ecosystem, as might updates
to the operating system. In these cases, a short-term
assessment may not reveal the entire ecosystem and
products and services may enter or exit the network
as the time frame under consideration is expanded.
4. What are customer ecosystems?
Customers, much like products, are also related to
one another and form an ecosystem. These relation-
ships are based on a variety of factors including
common backgrounds, interests, adoption and con-
sumption patterns, and overall goals. The information
shared by these customers across their respective
networks shapes preferences and influences the ac-
ceptance or rejection of products, services, ideas,
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
ecosystem is a friends network on Facebook, the
popular social networking site. For illustrative pur-
poses, we constructed the ecosystem for a small group
229
of individuals based on data collected from this site
(Figure 3).1 The structure of the network in Figure 3
suggests that Mike is centrally connected in his
friends networks and can reach a bigger audience
through word-of-mouth than some of the others,
including Kris, Harry, and Angie. To that extent, prod-
ucts and ideas promoted by Mike are likely to be
viewed by a greater number of members in this net-
work than those supported by less-connected mem-
bers. Identifying such influential individuals in
customer ecosystems is becoming increasingly essen-
tial for the efficient dissemination of marketing infor-
mation and the quick adoption of products. Similarly,
addressing the concerns of such individuals through
either recovery efforts or proactively seeking their
opinion is also becoming vital to prevent the spread
of negative information that may be detrimental to
a brand.
5. The evaluation of ecosystems
Fundamentally, an ecosystem consists of a set of
entitiessay products or customersthat are
mutually interconnected based on preferences,
likelihoods of purchase, or similarity of interests.
While there are many ways to analyze these relation-
ships, one simple way is to think of an ecosystem as a
network of nodes and links. The characteristics of
the network can then help assess the nature of
1
The names of the network members are anonymized. This
ecosystem is based on actual data and is developed using the
network software, PAJEK. A free copy of the software can be
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
belong to the same product category and compete for
a larger share of it (Srivastava, Alpert, & Shocker,
1984). Of course, as the definition of the category is
relaxed, the competitive set becomes larger. But
even then, the fundamental notion of competition
comes from some form of hierarchical category struc-
tures. For example, if the category is defined nar-
rowly as diet colas, then Diet Pepsi may be seen as a
direct competitor to Diet Coke. However, as the
definition of the category is successively relaxed from
colas to non-alcoholic beverages to all beverages,
regular Pepsi, Gatorade, V8, Aquafina, and Budweiser
may sequentially begin to emerge as competitors.
The underlying assumption is that each of these
products has the ability to negatively impact the sale
of the focal product, Diet Coke.
However, in an ecosystems-based approach, the
notion of competition is much broader and is not
confined by tight or loose category boundaries. It
accommodates both positive and negative contribu-
tions from the sale of competing products to the sale
of a focal product. Competition is therefore concep-
tualized in terms of a system of linkages in a network
that includes all products or services whose adoption
either increases or decreases the adoption of the
focal product. In other words, competition is funda-
mentally defined on the basis of contingent adoption,
and any product whose sale directly or indirectly
influences the sale of the focal product through a
set of linkages is a competitor. If the impact of the
contingency is positive, the competitor is reinforcing;
if it is negative, the competitor is detracting. For
example, if popcorn facilitates the adoption of a
cola, it is a reinforcing competitor and may be labeled
a facilitator. Similarly, if a movie increases the sale of
popcorn, which in turn increases the sale of colas, the
movie will be considered a reinforcing, indirect com-
petitor. On the other hand, if the sale of popcorn
negatively impacts the sale of nachos then the two
will be mutually detracting competitors.
An ecosystem-based approach does not necessar-
ily substitute the conventional category-based no-
tion of direct competition. Rather, it adds a layer of
products or services that influence the adoption of
the focal product through a series of contingent
purchases. To that extent, it broadens the range
of entities that affect the adoption of the focal
product. Instead of characterizing competition as
entities that have the potential to take away sales
from the focal product, it also considers those that
have the ability to enhance these sales levels.
6.2. Market segmentation
A direct consequence of a change in the conceptuali-
zation of competition is a corresponding modification
231
in the development of customer segments. Under
the traditional marketing paradigm, a product
market is defined as a category that consists of
products or services that provide the same class
of benefits to customers. Customers may exhibit
variable preferences for the different attributes
that define the products within the category.
Those whose preference structures are similar,
who exhibit similar purchase patterns, or who
respond similarly to marketing mix variables form
a customer segment (Dickson & Ginter, 1987). In
other words, the act of segmentation represents
carving out customer groups based on some form of
similarity, but only with respect to a defined cate-
gory. The net result is segmentation within a spe-
cific category market. For example, there are
segments within the personal computer market,
within the breakfast cereal market, or within the
car market.
Because ecosystems transcend category bound-
aries, however, the conventional definition of cus-
tomer segments needs to be modified. While many
potential avenues are open for this modified ap-
proach, they all need to accommodate the variability
in individual-level ecosystems across customers; that
is, they must acknowledge the potential variation in
the inter-product networks across a customer pool.
For example, the purchase of popcorn may acceler-
ate the purchase likelihood of a cola for customers
with loose budget constraints, but may decelerate it
for those with tight constraints. If we generalize
across an ecosystem, we will observe variations in
the direction and strength of linkages among prod-
ucts or services across customers. A segmentation
system should therefore be based on the variations in
personal ecosystems rather than merely on variations
in preferences for attributes of products within a
category.
6.3. Brand footprint
From an ecosystems perspective, the footprint of
many brands may be much wider than what would
be estimated based on an evaluation of their impact
within their core categories. Consider some of the
popular products from Apple: The sale of an iPod,
iPhone, or iPad spurs the adoption of a wide variety of
accessories from multiple unrelated categories. To
that extent, these brands have large footprints. A
similar phenomenon occurs in one product category
following the adoption of a new major kitchen appli-
ance, the purchase of a luxury brand of clothing, or
the adoption of organic food. The single adoption
within each of these categories often leads to the
sequential sale of a subsequent set of loosely related
products.
232
This phenomenon requires new ways of concep-
tualizing and estimating brand footprints. The con-
ventional way of evaluating the footprint of Tide
within the laundry detergent category, or of Coca
Cola within the carbonated beverages category, may
be underestimating their true impact (Aaker, 1991).
For example, national brand managers today worry
about the impact of private labels. The adoption of
one private label product has a cascading effect on
the adoption of many others across multiple product
categories and the emergence of private label eco-
systems. Under a conventional, category-based ap-
proach, a private label within the paper towel
category will not be considered a competitor of a
national brand of peanut butter. However, under the
ecosystems-based approach, if the adoption of a
private label paper towel increases the likelihood
of adoption of private label peanut butter, then it
may serve as an indirect competitor to a national
brand peanut butter, and be partly responsible for
its loss of sales volume. Overall, brands and even
private labels today are part of larger ecosystems
and have larger footprints that go beyond their own
categories and affect out-of-category brands.
6.4. Intra-brand ecosystem
Much like in the case of a brand footprint, the eco-
system-based approach should change the strategic
thinking surrounding a brands own portfolio. From a
diagnostic perspective, it is important for brand
managers to recognize the linkages among the
various products in their portfolio and assess the
structure of their brand networks. They should assess
the location of the nuclei or hubs in the relevant
ecosystems and the linkage of their own brands to
them. They should also determine whether custom-
ers leapfrog within their own brand portfolio and
the variations in these leapfrogging patterns across
customers. For example, it is widely believed that
the introduction of music players, and subsequent-
ly the iPhone, has changed how customers enter
Apples brand portfolio and later adopt its other
products. Therefore, the nucleus of the Apple
product portfolio may change from personal com-
puters, to music players, to phones, and potentially
to tablets. Concurrently, the structure of the total
product ecosystem within the Apple portfolio may
evolve as well. Products that were perhaps the
nucleus at a point in time (e.g., computers) may
evolve to become peripheral products in its net-
work. In other words, the sale or adoption of
Apples computersonce its coremay become Grover, 1998). The result is that new products which
contingent on customer adoption of a sequence
of other Apple products. Overall, it becomes im-
portant for other multi-product firms to understand
M. Dass, S. Kumar
their brand ecosystems such that they can regulate
their marketing efforts toward inducing and navi-
gating customers through their brand portfolios.
6.5. Promotion planning
Frequent price promotions or the use of other tem-
porary sales-boosting devices is common across
many product markets. The underlying rationale
is that a short-term incentive induces some cus-
tomers to change brands, buy extra quantity, or
buy sooner than planned (Gupta, 1988). The net
result is a short-term increase in the sale of the
promoted brand. The metrics for evaluating the
impact of a promotion are therefore also based on
a comparison of the sales with and without the
promotion.
However, if products are related and form an
ecosystem, the impact of a promotion may once
again cascade across multiple product categories.
The effect could either be facilitating or detracting.
As a facilitator, the promotion in one category could
help release a budget constraint whereby savings
can potentially be spent on related or unrelated
products. For example, a temporary price discount
on a laptop computer might result in the purchase of
related products, such as an external hard drive, or
unrelated products, such as a leather jacket. On the
other hand, if a promotion induces an unplanned
purchase, it might restrict money that would have
otherwise been spent elsewhere. For example, a
promoted appetizer on a restaurant menu may be
bought spontaneously and thereby reduce the likeli-
hood of a dessert purchase. Once again, if we extend
these examples to larger networks, we would find
that the effects of promotions cascade across larger
ecosystems and influence the purchase likelihood
of products beyond known category boundaries.
Promotion planning and measurement of the effec-
tiveness of promotions will therefore need to be
significantly modified to accommodate the realities
of an ecosystem-based marketing approach.
6.6. New product development
The current new product development system is
silo-based and isolationist; it does not recognize
the importance of category inter-connectedness
and the existence of product ecosystems. The de-
velopment of new product concepts and the accept-
reject criteria for ongoing projects are consequent-
ly based on category-bounded thinking (Madhavan &
could potentially spawn new ecosystems are under-
rated, while those that promise to dominate within
their category bounds are well supported.
Bringing product and consumer ecosystems to the strategic forefront
Under an ecosystem-based thinking, new prod-
ucts would not be developed in isolation and would
not be evaluated based on potential profitability
within their narrow categories. They would instead
be developed with additional objectives that em-
phasize the strengthening of linkages within existing
ecosystems or building new ones. They would be
configured to optimize around an entire ecosystem
rather than around their individual categories. This
might lead to a radically different prioritization of
products and the criteria for evaluation. For exam-
ple, in an ecosystem, the purchase of a dress might
induce the purchase of a piece of jewelry, which
might cue the purchase of a pair of shoes, which
might cue the purchase of another dressall from
the same retailer. The key question under such
circumstances is the configuration of the first dress.
Under the conventional paradigm, it would be de-
signed to increase the likelihood of its own pur-
chase. Under the new approach, however, it
would need to be designed to also strengthen link-
ages with downstream contingent purchases in
order to optimize sales across the entire ecosystem
rather than merely within its own category. Alter-
natively, it could be designed to increase the likeli-
hood of its adoption in another ecosystem where it is
currently a peripheral product.
6.7. Customer valuation
An ecosystem-based marketing approach not only
changes how markets are segmented, but also how
customers are valued. For example, the ecosystem
for the Planet Earth DVD set consists of 36 potential
products that customers have some likelihood of
buying. Under the ecosystem-based approach, the
value of the customer will be assessed over the
entire ecosystem, not just the focal product or even
the set of similar products that the customer is likely
to buy. The new approach will change how high
versus low priority customers are determined, and
which specific products are promoted to each in
order for them to profitably navigate through the
ecosystem.
6.8. Strategic alliances
Under an ecosystem-based strategic mindset, com-
petition is not defined in terms of category bound-
aries; rather, it is conceptualized in terms of
facilitating and detracting linkages. These linkages
can be to products in widely different product
categories. Under this new paradigm, offense would
be defined in terms of getting customers to nodes
that have a strong facilitating impact on ones own
brand. Defensive strategies would be executed by
233
suppressing the migration to nodes that detract from
the focal brand. Because these nodes may belong
to multiple different categories, brands may need to
form out-of-category strategic alliances in order
to jointly navigate customers to nodes that have
synergistic benefits for alliance partners.
6.9. Market research
Finally, the market research mandate will need to
evolve in an ecosystem-based approach to market-
ing. A new purpose of marketing research will be to
understand the interconnected pathways that link
the focal brand to entities that define its ecosys-
tem. Marketers will need to know the preference,
adoption, leapfrogging, and evolutionary ecosys-
tems for their brands, as well as their relationships
to customer ecosystems. They must understand
how the existing and potential ecosystems may
be used to direct their promotional efforts, new
product development, and strategic alliances. The
tools and concepts used for market research will
therefore need to transcend within-category think-
ing and embrace multi-category, ecosystem-based
thinking.
7. Developing an ecosystem
orientation
The transition to an ecosystem-based world re-
quires a shift in the firms strategic mindset from a
category orientation to an ecosystem orientation.
This is a major transformation that will have to be
initiated by top management and cascade down
throughout the rest of the organization. Members
of the executive suite will have to recognize the
nature of the changing competitive landscape and
the need to strategize beyond category bound-
aries. They will be required to be ready to make
radically different resource allocation decisions to
strengthen the position of their offerings within
larger ecosystems, potentially at the expense of
losing within-category dominance. They will need
to train themselvesand also those in the larger
organizationto think differently about the new
meaning of competition, the evolving notion of
strategic positioning within networks, the new
tools of market research, and the expanded scope
of strategic alliances. Those who do so will win the
larger battle of ecosystems, and those who dont
will be left to fight smaller battles within their
narrow categories.
To implement an ecosystem-based strategy, those
in the executive suite will need to make organiza-
tional design changes and re-define brand/marketing
234
managers scope of responsibility. Under the current
category-centric organizational structures, a firms
business lines are divided into smaller categories or
sub-categories that are each managed by a cross-
functional brand management team. These brand-
based silos often have limited interaction across
them. In other words, multi-product firms are often
analogous to holding companies that merely provide
shared financial resources to a group of quasi-
independent brand businesses.
In order to make the transition to an ecosystem-
based organization on the dimensions listed in
Table 1, multi-product firms will have to institute
several changes in the roles and responsibilities of
brand managers, and potentially in their compensa-
tion structures. First, they will need to create a
coordinating body across loosely connected lines of
business that will be entrusted with the task of
identifying ecosystems, and ensure that decisions
within the brand-level silos do not compromise
system-wide returns. This body will be responsible
for assessing and enhancing the structure of contin-
gent sales across the firms product lines, as well as
mapping out these contingencies with regard to
product categories or specific brands within them.
Second, successful implementation of an ecosys-
tem orientation will require greater centralization
of research and development resources into a com-
mon pool so that products can be designed to not
only better serve a specific product market, but also
strengthen the positive relationships across the
firms product ecosystems. The go/no-go decisions
for new products will need to be made jointly by the
relevant brand management team and the central
coordinating body. This body will also influence the
architecture of brands across the firms portfolio in
order to facilitate customer migration across the
network of the firms products.
Finally, the compensation structure of individual
brand or marketing managers will have to be aligned
with the newer tasks of strengthening contingent
sales and optimizing product adoption networks, not
M. Dass, S. Kumar
merely with greater shares of narrowly defined
product categories. A change in the strategic mind-
set, a modification of the organizational structure
and responsibilities, and a re-alignment of the
compensation system will help organizations devel-
op an ecosystem orientation and implement strate-
gies based on it.
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