The Importance of Location for Digital CIOs
Transforming Banks for a Digital Future: The Winners, The Losers, and the Strategies to Beat the Odds
University of Pennsylvania professor David R. Bell discusses how real worlds and virtual worlds influence and affect each other, and are increasingly merging together.
CIO Insight: Tell our readers about how demand patterns for virtual-world sellers spread systemically from one real-world location to the next.
Bell: Through my research on a variety of Internet sellers, I found a really interesting pattern to how sales evolve over time and locations. When the business opens, demand pops up in a few locations, presumably those where customers are most interested or those who first find out about the new business. From there, it spreads outward via contiguity. There are two important reasons for this. First, the old "birds of feather flock together" idea. If one person in a given location likes a particular Internet seller, then odds are his or her neighbor will, too (or, at least, the neighbor will be more likely, on average, to like the same seller than a person chosen at random from some other location). This is because that neighbor faces the same offline options and likely shares preferences and characteristics with the earlier customer, which is why they both chose the same location to live in. Second, neighbors either interact directly via word-of-mouth or observe each other indirectly, like my apartment neighbors see the Harrys.com and Soap.com boxes of mine piling up in the foyer.
CIO Insight: In your discussion of vicinity, you write about how clusters of people in the virtual world often live far apart in the real world, but that these people often share common real-world circumstances and preferences. How'd you discover this?
Bell: This finding grew out of the earlier finding, which I discussed in the previous question, and relates quite a bit to Chris Anderson’s idea in The Long Tail. I noticed that if I looked long enough, customers were not only springing up through contiguity (for the two reasons mentioned above), but also in places that were far apart, yet that shared characteristics in terms of both resident profiles and offline options. This lead me to discover something I call The Spatial Long Tail in deference to Chris’ original idea, but this time the x-axis is location sales rank rather than product sales rank. That is, when you rank sales of an Internet seller by location you have the real hot spots in the head where there is a lot of demand (and it’s coming through contiguity) down to the tail locations where this is relatively less demand, but that demand is still important when all added together. Those tail locations tend to be physically separated, but share circumstances and preferences.
CIO Insight: Looking ahead, as the online world gets increasingly mobile, how will the variation of real-world landscapes predict the behavior of buyers and sellers in the virtual world?
Bell: I think the main thing is that consumer behavior will become more local and more spontaneous. Since we carry our devices with us all the time, there’s always an opportunity to "snack" while waiting in line at Starbucks or walking down the street and because the device has sensors and is location-enabled, we will be drawn to local options that are close (perhaps in everything from shopping, to restaurants, to meeting other people). So, that’s the local part. The "spontaneous" or opportunistic part might be driven by the seller, with deals popping up in my phone as I walk through certain locations, or by my own changed behavior. For instance, instead of searching on a laptop at work for where to go to lunch, I simply head to downtown Philadelphia, then take out my phone and search on location-aware Yelp for the option that’s decent and closest.
CIO Insight: Lastly, tell us about how you have made Gravity (geography, resistance, adjacency, isolation, topography and you) work for you?
Bell: Hmm, I like the question! When writing the book I wanted to have an organizing framework that was based on a simple yet powerful concept (Gravity = things that are close and "large" [i.e., better prices and assortment when we are talking about commerce] have more pull over us). Next, I wanted to expand that key idea as an acronym as well, because I thought this approach would help readers navigate all the underlying nuances. That’s why all the chapters have a “gravity-type” title, too.
So, as to my personal behavior …
The ideas in Geography have given me more insight into where I like to live (more urban environments and "up and coming" neighborhoods within them) and why. In a very real sense, living in Philadelphia really shaped my preferences for beer. It was here that I was first exposed to Belgian beer and now Belgians are my favorite. As to Resistance, I use the Internet all the time to access information and products that would otherwise be hard to come by. On a practical level, I haven’t set foot in a Wal-Mart or similar store for years as I get all my non-perishables from Soap.com. In terms of Adjacency, I am always on the lookout for new sites and sellers to try and get most of my ideas from co-located friends and colleagues. Vicinity is an easy one, especially in terms of content. I am part of a disparate community that interacts about rugby matches on Rugby365.com. Isolation is a little trickier as there isn’t really a product or service that I feel totally locked out of locally—since Philadelphia is pretty good—although I guess I have been exploring online classes in guitar. There isn’t a sufficient density of guitar students in my neighborhood for a teacher to be right next door so I am getting that service online. Topography is quite straightforward—I do a lot of poking around on Bonobos.com for clothes and to get ideas, but I still prefer to stop by a Bonobos Guideshop and try them on before buying. So, I use the Internet to get informed, but the real world to complete the transaction.
About the Author
Jack Rosenberger is the managing editor of CIO Insight. You can follow him on Twitter via @CIOInsight. To read his previous CIO Insight article, “Why Your Heartbleed Patch Isn't Enough," click here.
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