Most firms are very careful in how they manage the promotion of their products. One reason is because this activity is quite expensive. For example, in the US, a 30-second commercial on national television typically cost over $100,000 just to have a broadcast once. Since most commercials are shown more than once, this cost quickly multiplies into millions of dollars. This doesn't even include the cost of creating the commercial. The rise of new digital tools has dramatically changed this equation. Low-cost digital video cameras, free digital editing software, and online broadcasting platforms like YouTube, Facebook, and Twitter have made the creation and dissemination of promotional messages much cheaper and easier than ever before. As a result, a growing number of firms are taking advantage of these developments to reduce their promotional cost. For example, the US beer, [inaudible] has dramatically reduced its promotional cost by airing their ads on YouTube instead of television. In addition to reducing the cost of promotion for firms, these tools have also enabled customers to take a more active role in developing and disseminating their own promotional material. For example, there are over 330 million Twitter accounts which produce over 500 million tweets each and every day. It's estimated that about 20 percent of these tweets are somehow related to brands and products. Thus everyday, there are about 100 million free messages on Twitter alone. Today, just about anyone with an Internet connection, a computer or a smartphone, and an idea, and some energy can create and disseminate informational message for just about any product. In essence, these digital tools have democratized the promotional landscape and this is the basic idea behind user-generated content or UGC for short. Here are a few examples of user-generated content. All of these examples are cases in which firms are encouraging UGC. However, UGC often occurs without a firm's active encouragement or even approval such as when travelers post reviews about restaurants or hotels on websites like travelocity.com. First, GoPro. This California company develops and sells high definition video cameras. Perhaps, you own one. These cameras are compact, durable, and relatively inexpensive, and often used by extreme sports enthusiast like mountain bikers, wind surfers, and skydivers to capture their adventures. GoPro strategically uses UGC by holding contests. They ask their customers to submit photos or videos that they've taken with their cameras. These submissions provide a steady stream of content to GoPro's various social media sites and also provides a very persuasive form of motion by showing potential customers the value of having a GoPro camera. Now, we'll talk a bit more about GoPro in our case for this module. Second, Warby Parker. This is an American manufacturer and retailer of eyeglasses, they have a few physical retail locations but they do most of their business online. This company offers a service called Home Try-On in which they mail their customers five different pairs of glasses, they could then try them on for five days, and send the ones that they don't want back to the company. Now, Warby Parker actively encourages these customers to take photos of themselves wearing these different glasses and sharing them on social media using the hashtag, Warby Home Try-On. Now, many of their customers take and share these photos online as a way of getting helpful feedback from others. In addition to helping their customers, these shared photos also helped Warby Parker by providing them with an increased exposure and also, free promotion. Third, LittleBigPlanet, perhaps you've heard of this game. It's a very popular video game offered by Sony, the Japanese electronic giant. It is now in its third edition and has a built-in toolkit that allows players to create their own levels. Once these levels are created, their players can then share them with other customers. Currently, this game has over eight million levels, nearly all of them created by customers, not by the company. More recently, Sony, through its subsidiary called Media Molecule, has recently launched a new game called Dreams that takes this idea to an even higher level by using an enhanced customer toolkit. According to one report, Dreams is a game about creating games. What this means is that users can create just about anything within the Dreams' platform, including their own art, animation, and music. In essence, they can use these digital tools within the platform to create virtually any type of game they want or can imagine. They can share these games with others through the Dreams' platform. User-generated content occurs when a product's customers create and disseminate online ideas about a product or the firm that markets the product. These ideas are often the form of text, but also come in other forms such as music, photos, or videos. UGC has three key characteristics. First, the contribution is by users of a product rather than the firm that sells the product. Second, it is creative in nature and the user adds something new. Third, it is posted online and generally accessible to others. Thus, an e-mail that transmits a link to a YouTube video created by somebody else is not really UGC. Now typically, UGC is noncommercial in nature and doesn't make any types of direct promotional appeals. Thus, it is very indirect, subtle, and also an authentic form of product promotion. There are lots of interesting issues about UGC. For the purpose of this discussion, I like to focus on three key issues. First, what are the different types of UGC? Although most UGC appears on social media platforms like Facebook, Twitter, and YouTube, it can also appear in other online platforms like blogs, discussion forums, or even a firm's website. So the most common types of UGC include blog postings, product reviews, and various submissions through firm based invitations like the Warby Parker Home Try-On that we discussed earlier. Of all the different types of UGC, product reviews appear to be the most common and also has the strongest impact on customer purchasing decisions. Second, what motivates users to contribute? Now, the factors that motivate customers to engage in UGC are very similar to the motives that encouraged them to engage in co-creation, as we discussed earlier. The biggest motive appears to be social recognition. Being an active contributor on a social media platform such as Facebook or Twitter, and they will provide a certain amount of fame and prestige, at least for some people. In addition, customers can also gain social recognition when a firm profiles their contributions on his web-page or in his advertisements. For example, the yogurt company, Chobani, has placed its customer tweets on billboard signs throughout the US. In addition to social recognition, some users are motivated by financial incentives. Now typically, there are few financial rewards for most types of UGC. However, some firms try to encourage UGC by holding contests that provide winners with cash, gift cards, or some other type of tangible reward. For example, Dunkin' Donuts which now is called Dunkin, I believe, encourages UGC by holding contests which customers submit photos of themselves consuming those products and rewarding winners with a variety of prizes such as smart phones and televisions. What are the benefits of UGC? User contributions provide firms with lots of benefits. First of all, this type of promotion is typically low cost since the content is provided by a firm's customers for free. In addition to this cost savings, UGC has also been related positively to product sales. Research suggests that most customers trust UGC more than they trust traditional promotions like paid advertising. UGC also helps meet a firms need to keep his content fresh and makes their websites much more interesting. Thus, websites that feature UGC benefit both from higher traffic as well as longer page views.
